<PAGE>

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

(Mark One)

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

         For the quarterly period ended March 31, 2005

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

         For the transition period from ___________ to _____________

                        Commission file number: 001-16253

                       COMPUTERIZED THERMAL IMAGING, INC.
              -----------------------------------------------------
             (Exact name of Registrant as specified in its charter)

                   NEVADA                                        87-0458721
------------------------------------------------             -------------------
(State or other jurisdiction of incorporation or               (IRS Employer
                organization)                                Identification No.)

        1719 West 2800 South
            Ogden, Utah                                             84401
----------------------------------------                       ----------------
(Address of principal executive offices)                         (Zip Code)

                                 (801) 776-4700
                            ------------------------
              (Registrant's telephone number, including area code)

         Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports) and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]

         State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: Common stock, par value
$0.001, of which 114,561,698 shares were issued and outstanding as of April 30,
2005.

Transitional Small Business Disclosure Format (check one): Yes [ ] No [ X ]




<PAGE>


                       COMPUTERIZED THERMAL IMAGING, INC.


                                   FORM 10-QSB

                                QUARTERLY REPORT

                                TABLE OF CONTENTS

                         PART I - FINANCIAL INFORMATION

Item 1. Financial Statements...................................................3

             Condensed Consolidated Balance Sheets as of March 31, 2005
               and June 30, 2004 ..............................................3

             Condensed Consolidated Statements of Operations and Other
               Comprehensive Income (Loss) for the three and nine months
               ended March 31, 2005 and 2004 ..................................4

             Condensed Consolidated Statements of Cash Flows for the
               nine months ended March 31, 2005 and 2004.......................5

             Notes to Condensed Consolidated Financial Statements..............6

Item 2.    Management's Discussion and Analysis or Plan of Operation..........10

Item 3.    Controls and Procedures............................................22


                           PART II - OTHER INFORMATION

Item 1.    Legal Proceedings..................................................22

Item 6.    Exhibits and Reports on Form 8-K...................................23

SIGNATURES....................................................................24




<PAGE>

PART I - FINANCIAL INFORMATION
ITEM 1.  UNAUDITED FINANCIAL STATEMENTS
<TABLE>

                                              COMPUTERIZED THERMAL IMAGING, INC.
                                            CONDENSED CONSOLIDATED BALANCE SHEETS


                                                                          March           June 30,
                                                                           2005             2004
                                                                       ------------      ------------
ASSETS                                                                 (Unaudited)
<S>                                                                    <C>               <C>

CURRENT ASSETS:
  Cash and cash equivalents                                            $      6,383      $    168,955
  Accounts receivable-trade, net (less allowance for doubtful
    accounts of $0 at March 31, 2005 and $3,199 at June 30, 2004)            26,882            53,328
  Accounts receivable-other, net                                                 --             1,391
  Inventories                                                               220,036           260,331
  Prepaid expenses                                                           43,809            91,474
                                                                       ------------      ------------
        Total current assets                                                297,110           575,479
                                                                       ------------      ------------

PROPERTY AND EQUIPMENT, Net                                                 143,676           169,358
                                                                       ------------      ------------

INTANGIBLE ASSETS:
  Intellectual property rights, net (less accumulated amortization
    of accounts of $19,440 and 17,437 for March 31, 2005 and
    June 30, 2004, respectively)                                             13,407            15,410

TOTAL ASSETS                                                           $    454,193      $    760,247
                                                                       ============      ============

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES:
  Accounts payable                                                     $    539,952      $    512,542
  Accrued liabilities                                                       139,033           172,036
  Short-term Note Payable                                                   230,600           220,690
  Deferred revenues                                                       1,053,490         1,083,100
                                                                       ------------      ------------
        Total current liabilities                                         1,963,075         1,988,368
                                                                       ------------      ------------

LONG-TERM NOTE PAYABLE                                                      112,934           109,178
                                                                       ------------      ------------
TOTAL LIABILITIES                                                         2,076,009         2,097,546
                                                                       ------------      ------------

STOCKHOLDERS' EQUITY (DEFICIT):
  Convertible preferred stock, no par value, 3,000,000
    shares authorized; issued-none
  Common stock, $.001 par value, 200,000,000 shares authorized,
    114,561,698 issued and outstanding on December 31, 2004 and
    June 30, 2004                                                           114,562           114,562
  Additional paid-in capital                                             95,454,274        95,454,274
  Deficit accumulated                                                   (97,190,652)      (96,906,135)
                                                                       ------------      ------------
        Total stockholders' equity (deficit)                             (1,621,816)       (1,337,299)
                                                                       ------------      ------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                   $    454,193      $    760,247
                                                                       ============      ============



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

                                                              2


<PAGE>

                                         COMPUTERIZED THERMAL IMAGING, INC.
               CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSEIVE INCOME (LOSS)
                                                    (Unaudited)

                                                       FOR THE                                FOR THE
                                                  THREE MONTHS ENDED                     NINE MONTHS ENDED
                                                       MARCH 31,                             MARCH 31,
                                            --------------------------------      --------------------------------
                                                2005               2004               2005                2004
                                            -------------      -------------      -------------      -------------

INCOME:
  Product revenues                          $      51,483      $      54,218      $     168,513      $     176,220
  Service revenues                                 28,325             53,015             39,802             87,354
                                            -------------      -------------      -------------      -------------
Total Revenues                                     79,808            107,233            208,315            263,574
                                            -------------      -------------      -------------      -------------

  Cost of product revenues                        (23,212)           (13,444)           (45,734)           (76,375)
  Cost of service revenues                             --                 --                 --                 --
                                            -------------      -------------      -------------      -------------
Total cost of revenues                            (23,212)           (13,444)           (45,734)           (76,375)
                                            -------------      -------------      -------------      -------------

GROSS MARGIN                                       56,596             93,789            162,581            187,199
                                            -------------      -------------      -------------      -------------

OPERATING EXPENSES:
  Operating, general and administrative            23,878            251,961            278,054          1,176,775
  Litigation settlements                               --             10,000                 --            110,000
  Research and development                         17,118            264,266            108,024            927,967
  Marketing                                        (1,685)            45,296             23,755            296,425
  Depreciation and amortization                    10,584             36,000             27,683            131,700
                                            -------------      -------------      -------------      -------------

    Total operating expenses                       49,895            607,523            437,516          2,642,867
                                            -------------      -------------      -------------      -------------

OPERATING LOSS                                      6,701           (513,734)          (274,935)        (2,455,668)
                                            -------------      -------------      -------------      -------------

OTHER INCOME (EXPENSE):
  Interest income                                       4                313                 65              4,498
  Interest expense                                 (4,535)                (2)           (13,756)            (5,426)
  Other                                                 7                200                 51                200
                                            -------------      -------------      -------------      -------------

    Total other income (expense)                   (4,524)               511            (13,640)              (728)
                                            -------------      -------------      -------------      -------------

NET LOSS                                    $       2,177      $    (513,223)     $    (288,575)     $  (2,456,396)
                                            -------------      -------------      -------------      -------------

WEIGHTED AVERAGE SHARES
  OUTSTANDING                                 114,561,698        113,430,471        114,561,698        113,072,213
                                            =============      =============      =============      =============

BASIC AND DILUTED LOSS PER COMMON SHARE     $        0.00      $       (0.00)     $       (0.00)     $       (0.02)
                                            =============      =============      =============      =============

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

                                                         3



<PAGE>


                               COMPUTERIZED THERMAL IMAGING, INC.
                         CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                           (Unaudited)

                                                                             FOR THE
                                                                        NINE MONTHS ENDED
                                                                             MARCH 31,
                                                                   ----------------------------
                                                                      2005             2004
                                                                   -----------      -----------

CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss                                                         $  (288,575)     $(2,456,396)
  Adjustments to reconcile net income (loss) to net cash
    used in operating activities:
  Depreciation and amortization                                         27,685           54,797
  Amortization of bond premium (discount)                                   --          (15,192)
  Bad debt expense                                                          --           63,032
    Accounts receivable - trade                                         26,446          328,352
    Accounts receivable - other                                          1,391               --
    Inventories                                                         40,295          (27,846)
    Prepaid expenses                                                    47,665          118,268
    Accounts payable                                                    27,410          (26,985)
    Accrued liabilities                                                (19,337)         (28,279)
    Deferred revenues                                                  (29,610)         371,871
                                                                   -----------      -----------
           Net cash used in operating activities                      (166,630)      (1,618,378)
                                                                   -----------      -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Proceed from sale of assets                                               --           22,177
                                                                   -----------      -----------
           Net cash provided by (used in) investing activities              --           22,177
                                                                   -----------      -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from issuance of common stock and warrants,
    net of offering costs                                          $        --      $ 1,000,000
                                                                   -----------      -----------
           Net cash provided by financing activities                        --        1,000,000
                                                                   -----------      -----------

NET INCREASE (DECREASE) IN CASH
  AND CASH EQUIVALENTS                                                (166,630)        (596,201)

CASH AND CASH EQUIVALENTS AT
  BEGINNING OF PERIOD                                                  168,955          454,387
                                                                   -----------      -----------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                         $     2,325      $  (141,814)
                                                                   ===========      ===========

SUPPLEMENTAL CASH FLOW INFORMATION
  Cash paid for:
     Interest expense                                              $        --      $        --
     Income taxes                                                           --               --

SUPPLEMENTAL SCHEDULE OF NON-CASH
  FINANCING AND INVESTING ACTIVITIES
  Common stock issued to reduce debenture, interest and
   penalty                                                         $        --      $   157,277



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

                                               4

</TABLE>

<PAGE>

                       COMPUTERIZED THERMAL IMAGING, INC.
              Notes to Condensed Consolidated Financial Statements
                                 March 31, 2005
                                  (UNAUDITED)

NOTE A. UNAUDITED FINANCIAL STATEMENTS AND BASIS OF PRESENTATION

            The condensed consolidated financial statements of Computerized
Thermal Imaging (the "Company") for the three-month and six-month periods ended
March 31, 2005 and 2004 are unaudited. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation of the Company's results of operation for the periods
presented have been included. These interim statements should be read in
conjunction with the audited consolidated financial statements and footnotes
thereto contained in the Company's most recent Annual Report on Form 10-KSB for
the Year Ended June 30, 2004. The consolidated results of operations for the
three-month and nine-month periods ended March 31, 2005 are not necessarily
indicative of the results to be expected for the full year.

            Certain amounts from the prior period financial statements have been
reclassified to conform to current period presentation.

            The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions, including for example, accounts
receivable allowances, inventory obsolescence reserves, deferred tax valuation
allowances, and reserves for pending or threatened litigation. These assumptions
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates.

         The accompanying condensed consolidated financial statements have been
prepared assuming the Company will continue as a going concern. In its Annual
Report on Form 10-KSB for the Year Ended June 30, 2004, the Company reported
that its recurring losses from operations, negative cash flows from operations,
the Company's need for additional working capital, and the Company's continuing
struggle to obtain FDA approval for its primary product raised substantial doubt
about the Company's ability to continue as a going concern. The Company's
independent auditors have also expressed their doubts about the Company's
ability to continue as a going concern.

         In order to pursue its existing plan of operations, the Company will
have to secure additional financing through the sale of equity, the incurrence
of debt or the sale of assets, including the Company's intellectual property.
There can be no assurance that capital will be available from any source or, if
available, that the terms and conditions associated with such capital will be
acceptable to the Company. If the Company raises equity or debt capital, the
sale of these securities could dilute existing shareholders, and borrowings from
third parties could result in assets being pledged as collateral and could
provide loan terms that could adversely affect the Company's operations and the
price of its common stock.


                                       5


<PAGE>

         The accompanying condensed consolidated financial statements do not
include any adjustments relating to the recoverability and classification of
recorded asset amounts or the amounts and classification of liabilities that
might be necessary if the Company is unable to continue as a going concern.

NOTE B. REVENUE RECOGNITION

         The Company generates revenues from sales of its products and from
services provided to its customers. The Company sells its products to
independent distributors and to end customers. With the exception of sales
transactions in which a customer may return a defective product, the Company
does not provide its customers with other rights to return products.

         The Company recognizes revenue from its product sales to end customers
upon shipment of products when persuasive evidence of an agreement exists,
delivery of the product has occurred, no significant Company obligations remain,
the fee is fixed or determinable, and collectibility is probable. If these
conditions are not met, revenue is deferred until such obligations and
conditions are fulfilled. If the Company retains an ongoing obligation under a
sales arrangement, revenue is deferred until all of the Company's obligations
are fulfilled.

         The Company has adopted the practice of deferring revenue on shipments
to distributors until cash payment from the distributor is received by the
Company, which is generally when the product is sold by the distributor to the
end customer.

         Certain of the Company's products contain software that is not
considered incidental to the product. Sales of those products are subject to the
provisions of AICPA Statement of Position No. 97-2, SOFTWARE REVENUE
RECOGNITION, as amended, which requires the deferral of revenue from certain
multiple-element arrangements. The Company defers revenue from multiple-element
arrangements until all elements have been delivered.

         Service revenue is derived from non-destructive testing of turbine
blades and other items as well as service of medical equipment previously sold
but not covered by warranty. Service revenue is recognized upon the completion
of the services provided. The Company offers extended warranties on certain of
its products. Warranty revenue is recognized ratably over the period of the
agreement as services are provided.

NOTE C. DEFERRED REVENUE

         Deferred revenues at March 31, 2005 was approximately $1,053,996, and
consisted of $660,000 of deferred revenues from the NanDa licensing and
manufacturing agreement, $4,056 of deferred warranty revenues and $389,940 of
deferred industrial revenues and deposits relating the Turbine Blade Inspection
System ("TBIS") the Company shipped to Pratt & Whitney. Deferred revenues at
June 30, 2004 was approximately $1,083,100, and $660,000 of deferred revenues
associated with a manufacturing/licensing agreement between the Company and
NanDa Thermal Medical Technology, Inc. ("NanDa"), $7,705 of deferred warranty
revenues and $415,395 of deferred industrial revenues and deposits relating
primarily to the TBIS the Company shipped to Pratt & Whitney.


                                       6


<PAGE>


DEFERRED REVENUES                                    MARCH 31,       JUNE 30,
                                                       2005            2004
                                                   -------------   -------------
     Nanda Licensing                                    660,000         660,000
     Medical Products                                                     3,000
     Industrial Products                                389,940         496,000
     Warranty Revenue                                     4,056          13,000
                                                   -------------   -------------
Total Deferred Revenue                             $  1,053,996    $  1,172,000
                                                   =============   =============

         Industrial products deferred revenue consists of non-destructive
testing devices shipped to Pratt & Whitney. The Company anticipates that it will
recognize these sales when it has completed its obligations under the purchase
agreements with Pratt & Whitney. Although the equipment has been shipped,
installed, and is in use the customer awaits a final calibration and test
performed on site by the Company. The $389,940 has been paid by Pratt & Whitney.
The Company has deferred the full amount of the contract until the final
calibration and testing can be performed on customer site. This is in accordance
with the Company's revenue recognition policy.

         The Company's Manufacturing License Agreement with NanDa (the "NanDa
Agreement") is billed in stages. The Company has billed NanDa $660,000 to date
and received payment for $660,000. The NanDa Agreement obligates the Company to
provide training services for NanDa employees in the United States and in China.
The Company has provided the training services for NanDa employees in the United
States, but, has yet to train in China. Therefore, according to the Company's
revenue recognition policy, the Company will not recognize any revenue from the
NanDa Agreement until all its obligations are performed or the NanDa Agreement
is deemed to be complete.

NOTE D. INVENTORIES

         Inventories are stated at the lower-of-cost or market with cost
determined using the first-in first-out method of accounting. As of the dates
set forth below, the Company's inventories consisted of the following:


                                                     MARCH 31,       JUNE 30,
                                                       2005             2004
                                                   -------------   -------------

Raw materials                                      $    577,230    $    616,508
Inventory reserve                                      (629,967)       (629,967)
Work-in process                                          29,379          18,629
Finished goods                                          243,394         255,161
                                                   -------------   -------------
Total                                              $    220,036    $    260,331
                                                   =============   =============


                                       7


<PAGE>

         Finished goods inventory at March 31, 2005 consisted of approximately
$243,394 of finished goods ready for sale, $29,379 in the manufacturing process
and $577,230 of raw materials. In their report on the Company's condensed
consolidated financial statements for the year ended June 30, 2004, the
Company's independent auditors expressed concern regarding the Company's ability
to continue its operations as a going concern. As a result of that concern,
coupled with the decision of the U.S. Food and Drug Administration (the "FDA")
to deny pre-market approval of the Company's breast imaging system, (the "BCS
2100"), the Company has treated its inventories as impaired assets on its
condensed consolidated financial statements for the quarter ended March 31,
2005. The impairment is held in a reserve account and represents about 74% of
all inventories.

         The Company has in the past reserved for excess and obsolete inventory
by comparing inventory on hand to estimated consumption during the next twelve
months. Consumption is estimated by annualizing trailing three or six -month
sales volumes, adjusting those volumes for known activities and trends, then
comparing forecast consumption to quantity on hand. However, the Company
evaluates all inventories to determine if the total impaired book value could be
recovered if liquidation becomes necessary. The Company felt no need to impair
additional inventory in the quarter ended March 31, 2005

NOTE E. INCOME TAXES

         The Company accounts for income taxes using the liability method. Under
this method, the Company records deferred income taxes to reflect future year
tax consequences of temporary differences between the tax basis of assets and
liabilities and their financial statement amounts. The Company has reviewed its
net deferred tax assets, together with net operating loss carry-forwards, and
has provided a valuation allowance to reduce its net deferred tax assets to
their net realizable value. Due to the going concern status of the Company there
are no deferred tax assets.

NOTE F. CONTINGENCIES

SEC INVESTIGATION

         In December 2002, we were requested to provide certain documents to the
SEC and the U.S. Department of Justice in connection with an investigation
regarding possible violations of the insider trading prohibitions found in the
federal securities laws. We have responded to the Commission's requests for
copies of documentation, and members of CTI management have provided testimony
to the Commission. To date, we have incurred approximately $650,000 in legal
costs in complying with these requests. CTI also may be required to indemnify
its officers and directors in connection with fees incurred in connection with
these investigations. Our efforts to respond to the Commission's requests have
required, and in the future may require, significant additional legal expenses,
may make fund raising more difficult if not impossible, and will distract
management from our day-to-day operations.

INDEMNIFICATION

       Under our bylaws and contractual agreements, CTI may be required to
indemnify its current and former officers and directors who are parties to
litigation or other proceedings by providing legal defense through the CTI
attorneys (or reimbursing the parties for their own attorneys) and covering all
damages the parties may suffer if the plaintiffs are successful.

                                       8


<PAGE>

OTHER LEGAL PROCEEDINGS

We are involved in certain other litigation matters in the normal course of
business which management currently believes are not likely to result in any
material adverse effects on our financial position, results of operations, or
net cash flows.

NOTE G. RECENT DEVELOPMENTS

         On June 30, 2004 the Company filed a "Citizen Petition" with the FDA
contending that consideration of the Company's application for pre-market
approval was severely and improperly prejudiced because of pervasive bias
against the Company by the FDA staff reviewers who improperly undermined the
review of the Company's application and ultimately caused the FDA to reject that
application. The Company is seeking internal documents within the FDA to
determine the basis for the FDA staff's behavior. The full text of the full
Citizen Petition and 23 exhibits thereto are available at
http://www.fda.gov/ohrms/dockets/dailys/04/july04/070104/04p-0276-cp00001
-toc.htm.

On January 11, 2005 Computerized Thermal Imaging, Inc. entered into a "PREFERRED
STOCK ISSUANCE AGREEMENT" with Strategica Management, LLC. (See form 8-K filed
with the SEC on January 18, 2005.)

         Strategica Management, LLC is a Merchant banking and Financial services
company that provides advisory and financial services to its client business.
Strategica provides or arranges debt and/ or equity capital and value, and
venture partners for clients and provides financial and business advisory
services utilizing its relationships and financial expertise for emerging
companies. Through their combined experience, Strategica executives have been
involved with a variety of debt, equity, mergers, acquisitions and financings in
multi-millions of dollars. Strategica is diversified as to industry and
geography and is proficient in providing management support, creative financial
strategies and sophisticated debt restructurings. (www.strategica.net)

         As of date of filing of this statement Strategica Management, LLC has
been unable to provide any added value to the Company in either cash or sales
contracts.

NOTE H - OTHER REGULATORY MATTERS

The Company has received a Medical Device License from Health Canada to market
the BCS 2100 in Canada. In late August 2004, the Company shipped the first BCS
2100 to Ville Marie in Montreal, Canada for a one-to-three month evaluation that
may result in a lease of the device at the end of evaluation. Due to the limited
resources the Company has been unable to support Ville Marie in their efforts to
incorporate the BCS 2100 into their operations. As of filing of this statement
Ville Marie continues to possess the BCS 2100.

                                       9


<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

         FORWARD-LOOKING STATEMENTS CONCERNING OUR BUSINESS

         The following discussion should be read in conjunction with the
Condensed Consolidated Financial Statements, the notes thereto and the other
information included in this Report. Certain statements in this "Management's
Discussion and Analysis or Plan of Operation" are forward-looking statements.
When used in this document, the words "expects," "anticipates," "intends,"
"plans," "may," "believes," "seeks," "estimates," and similar expressions
generally identify forward-looking statements. The forward-looking statements
contained herein are based on current expectations and entail various risks and
uncertainties that could cause actual results to differ materially from those
expressed in such forward-looking statements. For a more detailed discussion of
these and other business risks, see "Factors that May Affect Future Results."

OVERVIEW

         Our mission is to improve the quality of life by raising the
performance standards of infrared thermal imaging technology for both the
medical device and industrial markets. We design, manufacture and market thermal
imaging devices and services used for clinical diagnosis, pain management and
industrial non-destructive testing. We provide inspection services and design
and build non-destructive test systems for industrial customers.

         Our current products are the BCS 2100, Photonic Stimulator, Thermal
Image Processor ("TIP") and our TBIS. We have historically marketed our products
with an internal sales force and through independent distributors. At present,
however, due to our troubled financial condition, we are not actively marketing
our products with the exception of our web page (www.cti-net.com). To date, our
revenues have been generated principally from the sale of our Photonic
Stimulator, TIP, TBIS and services provided in connection with our TBIS.

         Given our inability to market our principal product unless we secure
FDA pre-market approval, our need to raise capital to fund our operations, our
history of losses ($97 million since inception), and the risk of pending or
future litigation, our independent auditor's opinion dated September 24, 2004
contains a "going concern qualification," meaning that our independent auditors
have indicated that there is substantial doubt as to our ability to continue as
a going concern. Our efforts to raise additional funds to date have been only
marginally successful. Since the FDA's rejection of our application for
pre-market approval of the BCS 2100 in December 2002, we have raised $500
thousand in advances under an equity line of credit with Beach Boulevard, $1.32
million through a private issuance of restricted stock, $660 thousand from the
NanDa Agreement and $220 thousand from short-term notes. We have pursued
additional financing transactions, but, as of the date of this Report, we have
been unsuccessful in our efforts to raise additional capital. On January 11,
2005 we entered into a "PREFERRED STOCK ISSUANCE AGREEMENT" with Strategica
Management, LLC to assist us in our efforts to raise funds through equity, debt
and revenue producing contracts. Strategica's efforts have resulted in no
additional cash nor producing contracts. Regardless of the FDA's ultimate
decision regarding our application for pre-market approval of the BCS2100, we
will require additional capital to execute our operating plan, which may include
more clinical trials, research and development, marketing into Canada and
marketing and manufacturing expenses.

                                       10


<PAGE>

         The following discussion and analysis of our consolidated financial
condition and results of operations should be read in conjunction with our
audited condensed consolidated financial statements and notes thereto contained
in our Annual Report on Form 10-KSB for the fiscal year ended June 30, 2004.

         CRITICAL ACCOUNTING POLICIES

         The preparation of financial statements requires us to estimate the
effect of various matters that are inherently uncertain as of the date of the
financial statements. Each of these required estimates varies in regard to the
level of judgment involved and its potential impact on our reported financial
results. Estimates are deemed critical when a different estimate could have
reasonably been used or where changes in the estimate are reasonably likely to
occur from period to period, and would materially impact our financial condition
or results of operations. Our significant accounting policies are discussed in
Note 1 of the Notes to Condensed Consolidated Financial Statements. Critical
estimates inherent in these accounting policies are discussed in the following
paragraphs. Our management has discussed the development and selection of these
critical accounting policies with the Audit Committee of our Board of Directors.

         CASH AND CASH EQUIVALENTS -- Cash and cash equivalents include cash in
checking accounts and short-term highly liquid investments with an original
maturity of one year or less.

         REVENUE RECOGNITION --Revenue recognition is a significant business
process that requires management to make estimates and assumptions. We recognize
revenue from product sales after shipment when persuasive evidence of an
agreement exists, delivery of the product has occurred, no significant
obligations remain, the price or fee is fixed or determinable, and collection is
probable. If these conditions are not met, revenue is deferred until such
obligations and conditions are fulfilled.

         Our standard domestic terms for our medical products to end-user
customers are "net 30 days," and our standard international terms for our
medical products require payment in cash or placement of a letter of credit
before shipment. On occasion, we offer extended payment terms beyond our normal
business practices, usually in connection with providing an initial order of
demonstration equipment to a new domestic distributor. We consider fees on these
extended terms agreements not fixed and collectibility less than probable and
defer the revenue until receipt of payment. Our sales prices have declined over
time and we credit price decreases to any balance due from a distributor. We
sell separate extended warranty contracts for our TIP and Photonic Stimulator
and recognize revenue from those arrangements ratably over the contract life. We
do not offer rights or return privileges in sales agreements.

         Industrial sales are made pursuant to individually negotiated
commercial contracts which specify payment terms that have ranged from 60 to 90
days from shipment or service completion. With industrial products, even if
delivery and payment have occurred, we may retain a significant ongoing
obligation under a sales arrangement for the delivery of components or
customized software and customer testing, and we defer recognizing revenue until
all the multiple elements of the sale are completed. Most recently, service on
industrial equipment have been the Company's major source of cash.

                                       11


<PAGE>

         RESEARCH AND DEVELOPMENT EXPENSES -- We expense as incurred the direct,
indirect and purchased research and development costs associated with our
products. We believe this method is conservative given the product and market
acceptance risk inherent to our products and reduces administrative burden and
cost.

         IMPAIRMENT OF LONG-LIVED ASSETS -- We follow the provisions of
Financial Accounting Standards Board ("FASB") SFAS No. 141, ACCOUNTING FOR THE
IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF,
which requires that if the sum of the future cash flows expected to result from
the assets, undiscounted and without interest charges, is less than a company's
reported value of the assets, the asset is not recoverable and the company must
recognize an impairment. The amount of impairment to be recognized is the excess
of the reported value of the assets over the fair value of those assets and is
recorded as impairment expense on our statements of operations. In estimating
impairments, management makes assumptions about future cash flows and fair value
that are inherently uncertain, can significantly affect the results and may
differ from actual future results.

         INVENTORY RESERVES -- We have in the past reserved for excess and
obsolete inventory by comparing inventory on hand to estimated consumption
during the next twelve months. Consumption is estimated by annualizing trailing
three or six-month sales volumes, adjusting those volumes for known activities
and trends, then comparing forecast consumption to quantity on hand. However, we
evaluate all inventories to determine if the total impaired book value could be
recovered if liquidation is necessary. We felt no need to impair additional
inventory during the quarter ended March 31, 2005.

TRENDS/UNCERTAINTIES AFFECTING CONTINUING OPERATIONS

         We are exposed to the opportunities and risks usually associated with
marketing and manufacturing novel products, including staff retention and
recruiting, market acceptance of our products, product warranty, bad debts and
inventory obsolescence. We expect to earn revenues from the sale of our
products, but there is no guarantee that these revenues will recover all the
costs of marketing, selling and manufacturing our products.

         We have only internet marketing efforts at present due to our current
lack of resources. If we are able to acquire additional capital, of which there
can be no assurance, we hope to be able to resume marketing efforts by building
relationships with manufacturers, medical equipment dealers, physicians and
clinical investigators; communicating with our target markets by attending trade
shows and conferences, making direct sales calls, and sponsoring clinics in
which we could introduce and demonstrate our products. We believe marketing
medical products through trade shows, conference presentations, direct mail and
inside sales, augmented with dealers, provides a low-cost, high-leverage
approach to diagnostic imaging and pain management practitioners.

         If resources permit, we hope to be able to organize clinical studies
with institutions and practitioners to obtain user feedback and to secure
technical papers for training and marketing purposes. These strategies represent
a significant investment of time and resources and in the past have provided
useful information; however, there can be no guarantee that these strategies
will lead to market acceptance of our products.


                                       12


<PAGE>

         To date, we have had limited operating revenues from the sale of our
products and services ($4 million in total revenues since inception). We cannot
provide any assurance that we will achieve profitability in the future. Our
immediate priority is to produce revenue by utilizing existing TIP and Photonic
Stimulator inventory, then, to expand our market in Canada where we have
obtained the necessary licenses for our current product offerings to pursue the
U.S. market for our TIP and Photonic Stimulator; and to reconcile issues
presented to the FDA in our Citizens Petition. At this time, we are unsure how
much time and additional financing we will require to resolve issues with the
FDA. We are also unsure about our ability to raise additional financing that
will be required to continue our business operations. These uncertainties, among
others, raise doubts about our ability to continue as a going concern.

FACTORS THAT MAY AFFECT FUTURE RESULTS

         Our operating results and financial condition are subject to
substantial risks and uncertainties. These risks and uncertainties include, but
are not limited to, the following:

         o    Our failure to secure customer contracts for multiple TIP and
              Photonic Stimulator installations could jeopardize our agreement
              with our primary ally, Strategica, limiting our ability to fund
              the minimal sales efforts.

         o    Our failure to obtain FDA approval of our BCS 2100 would continue
              to have a material adverse impact on our results of operation and
              financial condition, and may result in cessation of our operations
              entirely.

         o    We have limited revenues from operations and may never have
              substantial revenue from operations.

         o    Failure to obtain insurance reimbursement codes for our BCS 2100
              may make the BCS 2100 unmarketable, thereby threatening the
              continued operation of our company and adversely affecting
              shareholder value.

         o    We expect to continue to incur losses, deficits, and deficiencies
              in liquidity for the foreseeable future. Unless we are able to
              reverse those trends, we will likely be unable to continue our
              operations.

         o    We may sell assets or reduce activities to fund operations, which
              could adversely affect shareholder value.

         o    The recent volatility in the market price of our common stock
              could continue and adversely affect shareholder value.

                                       13


<PAGE>

         o    We could issue preferred stock or sell other securities or other
              financing instruments, including convertible debt, which could
              result in significant dilution to existing shareholders.

         o    We rely on third parties in the development and manufacture of key
              components for our products. If they fail to perform, product
              development and/or production could be substantially delayed.

         o    If we are unsuccessful in preventing others from using our
              intellectual property, we could lose a competitive advantage. If
              our intellectual property infringes the rights of other parties,
              we could incur damages or be forced to cease using marketing or
              selling those products.

         o    We do not have product liability insurance; if we are made subject
              to a products liability claim, whether or not the claim is
              meritorious, our results of operation and financial condition may
              be adversely affected.

OTHER FACTORS THAT MAY AFFECT FUTURE RESULTS.

         The foregoing factors should be read in conjunction with our audited
condensed consolidated financial statements, notes thereto and risk factors set
forth in our Annual Report on Form 10-KSB for the fiscal year ended June 30,
2004 (the "Form 10-KSB"). Many of the risks identified above are discussed in
greater detail in the Form 10-KSB.

RESULTS OF OPERATIONS

QUARTER ENDED MARCH 31, 2005, COMPARED TO QUARTER ENDED MARCH 31, 2004

         REVENUES

         Revenues for the three and nine months ended March 31, 2005 decreased
$27 and $55 thousand, or 26% and 21%, respectively, from the same period last
year of the $107 thousand and $263 thousand to $80 and $208 thousand
respectively; $51 thousand (three months) and $169 thousand (nine months) of our
revenues resulted from product sales and rental revenue; $24 thousand (three
months) and $28 thousand (nine months) from services and repairs of equipment
previously sold not under warranty; $4 thousand (three months) and $12 thousand
(nine months) was recognition of warranty revenue. The decrease in revenue was
primarily attributed to the reduction in sales force and other resources.

         There were no unfilled orders as of March 31, 2005 as compared to one
unfulfilled order for a TIP camera for $47 thousand as of March 31, 2004.

         We recognized $26 thousand (three months) and $61 thousand (nine
months), or 33% (three month) and 29% (six month) of total revenue, in foreign
sales, consisting primarily of fees generated from the rental of a TIP camera to
a Canadian customer in 2004 and repair of an industrial camera in England.


                                       14


<PAGE>

         COSTS AND EXPENSES

         Gross margins for the three and nine months ended March 31, 2005 were
$57 thousand (three months) and $163 thousand (nine months), compared to gross
margins of $94 thousand (three months) and $187 thousand (nine months) for the
same periods of the prior year or a 40% decrease (three months) and a 13%
decrease (nine months). Total cost of goods sold for the three and nine months
ended March 31, 2005 was $23 thousand (three months) and $46 thousand (nine
months), compared to $13 thousand (three months) and $76 thousand (nine months)
for the same periods last year. Gross margin as a percentage of revenue has
decreased from 78% to 71% (three months) however, increased from 71% to 87%
(nine months).

         The increase in gross margin resulted primarily from the significant
reduction in our cost of goods sold. Our cost of goods declined for several
principal reasons. First, we have dramatically reduced our operations, which has
resulted in significantly lower revenues, but has also reduced our cost of
goods. Second, in part as a result of our reduced level of operations, we have
experienced lower costs of servicing equipment. Third, a change in mix of
revenue from product sales to service most recently, service revenue tending to
bring higher margins.

         We are currently in the process of developing a revised business
structure that we believe will enhance revenue through leasing our products and
providing services to our customers rather than direct sales.

         General and administrative expenses for the three and nine months ended
March 31, 2005 were $24 thousand (three months) and $252 thousand (nine months),
compared to $278 thousand (three months) and $1,287 thousand (nine months) for
the same period last year, a decrease of $228 thousand (three months) and $1,177
thousand (nine months), or 82% (three months) and 91% (nine months). The
decrease reflects the reduction in sales as well as the Company's inability to
raise capital. The decrease consisted of declines in salary expense ($139
thousand for three months; $298 thousand for nine months), office expense ($16
thousand for three months; $38 thousand for nine months), and professional
services and legal expense ($66 thousand for three months; $443 thousand for
nine months), insurance expense ($4 thousand for three months; $57 thousand for
nine months), travel expenses ($2 thousand for three months; $43 thousand for
nine months), rent expenses ($24 thousand decrease for three months; $12
thousand decrease for nine months) and outside labor ($2 thousand for three
months; $29 thousand for nine months)

         Research and development expenses for the three and nine months ended
March 31, 2005 were $17 thousand (three months) and $264 thousand (nine months),
compared to $108 thousand (three months) and $927 thousand (nine months) for the
same periods last year, a decrease of $91 thousand (three months) and $633
thousand (nine months), or 84% (three months) and 68% (nine months). The
reduction in research and development is due to the lack of sales and the
company's inability to attract capital funds.

         Marketing expenses for the three and nine months ended March 31, 2005
were negative $2 thousand (three months) and $45 thousand (nine months),
compared to $23 thousand (three months) and $296 thousand (nine months) for the
same periods last year, a decrease of $47 thousand (three months) and $273
thousand (nine months), or 104% (three months) and 92% (nine months), from the
same periods last year. Again due to the lack of sales and other resources any
marketing efforts have been terminated with the exception of the Company's web
site www.cti-net.com.

                                       15


<PAGE>

         We continue to seek cash to fund on going operations as well as efforts
to pursue FDA approval of our BCS 2100. However, our efforts in the near future
will concentrate on leasing and service contracts with strategic customers,
which, we believe, will eventually provide us with the cash needed to continue
product development and FDA approval. Securing a favorable recommendation from
the FDA is critical to obtaining additional capital funding. Due, however, to
the delay in FDA response, we have been forced to conserve cash by reducing
expenses throughout the Company. We feel it is not wise to continue development
of a product that has not yet been approved by the FDA.

         Depreciation and amortization expense for the three and six month
periods ended March 31, 2005 decreased $25 thousand (three month) and $104
thousand (six month) from $28 thousand (three month) and $132 thousand (six
month) to $11 thousand (three month) and $36 thousand (six month), or 71% (three
month) and 79% (six month) decrease, compared to the same periods of the prior
year. During fiscal 2003, we impaired all assets to reflect possible recovery
values due to the concern expressed by our auditors that we may not be able to
continue as a going concern. There was no additional impairment in the three and
six-month periods ended March 31, 2005.

         OPERATING INCOME / LOSS

         We recorded an operating income of $7 thousand (three months) and a
operating loss of $514 thousand (nine months) ended March 31, 2005, compared to
an operating loss of $275 (three months) and $2.4 million (nine months) ended
March 31, 2004. The operating loss improvement of approximately $520 thousand
(three months) and $2.2 million (nine months) was due principally to our receipt
of revenues resulting from an existing customer's need for repairs and service
on previously purchased products, sale of our Photonic Stimulator and reduction
of costs due to our current lack of sales and capital funding.

         OTHER INCOME

         Net interest and other expense for the three and nine month periods
ended March 31, 2005 decreased $5 thousand (three months) and $13 thousand (nine
months) from the same periods of 2004, from $14 thousand expense (three months)
and $1 thousand expense (nine months) to a net expense of $5 thousand (three
months) and $1 thousand income (nine months). Interest expense is primarily an
accrual of imputed interest on three loans of $100 thousand, $200 thousand and
$20 thousand, all to related parties. There was virtually no interest income due
to the lack of cash.

         NET INCOME/(LOSS)

         We recognized no extraordinary gains or losses, therefore, net income
and operating income were identical. We also recorded no income taxes or income
tax benefit due to the going concern opinion issued by our auditors. Because our
future as an on going business is in question our ability to take advantage of a
booked tax benefit is also in question. Therefore, no benefit has been
recognized. However, we do hope to be able to, in the future, obtain a
profitable operational status at which time we could then take advantage of a
net operating loss carry-forward for tax purposes.

                                       16


<PAGE>

         The net income and loss for the three and nine month periods ended
March 31, 2005 resulted in a per share income of less than $0.001 (three months)
and loss of less than $0.005 (nine months), compared to a per share loss of less
than $0.003 (three months) and $0.02 (nine months) ended March 31, 2004.

LIQUIDITY AND CAPITAL RESOURCES

         SOURCES AND USES OF LIQUIDITY

         Our sources of funds used for operations have historically come from
selling common stock, as well as the issuance and exercise of options and
warrants, revenues generated from operations, sales of marketable securities,
interest earned from marketable securities available for sale and debt
assumption.

         For the three and nine month periods ended March 31, 2005 our sole
source of cash was from sales and collection of prior sales. We did not generate
cash from the sale of equity or issuance of debt during the period. Comparably,
during the same periods ended March 31, 2004 we generated $0 (three months) and
$1 million (nine months) in cash from the sale of equity (a July 2003 private
placement).

         Our cash requirements include, but are not limited to, general
corporate expenses including employee salaries and benefits, lease payments on
office space, legal and accounting fees for litigation and public company
reporting requirements, costs of clinical trials and studies and technical
support, FDA consulting expenses, procurement of inventory and supply expenses
associated with our efforts to develop, manufacture and market our medical and
industrial applications. We have reduced many of these costs in an effort to
preserve cash; however, a most of these costs are attributable to activities
that are necessary to continue our operations.

         Net cash used in operating activities for the nine months ended March
31, 2005 was $167 thousand, compared to $1.6 million use of cash for the nine
months ended March 31, 2004. The decrease in cash used in operating activities
was primarily a result of our efforts to decrease our expenses and cash outlays
and is affected by fluctuations in accounts receivable, accounts payable and
accrued expense balances.

         As of May 1, 2005, our current monthly expense rate is under $20
thousand; our monthly expense rate at our former full operational level was
approximately $1.1 million.

         We have no contractual obligations nor commitments as of March 31,
2005. All rentals and leases are on a month-to-month basis.

                                       17


<PAGE>

CAPITAL REQUIREMENTS/PLAN OF OPERATION

         Our capital requirements have varied significantly from our estimates
and will likely continue to vary from those estimates. Our capital requirements
depend upon numerous factors including, but not limited to: a) FDA approval
process; b) results of pre-clinical and clinical testing; c) costs of
technology; d) time and costs involved in obtaining other regulatory approvals;
e) costs of filing, defending and enforcing any patent claims and other
intellectual property rights; f) the economic impact of developments in
competing technology and our markets; g) competing technological and market
developments; h) the terms of any new collaborative, licensing and other
arrangements that we may establish; i) litigation costs; and j) costs we incur
in responding to inquiries and investigations conducted by the SEC and other
governmental entities.

         Since inception, we have generated significant losses from operations
($97 million) and, although we have generated some revenues ($3.9 million), we
are still a development stage enterprise. We have taken actions to reduce our
expenses and cash consumption; however, we expect to incur additional operating
losses for the indefinite future. Our working capital requirements in the
foreseeable future will depend on a variety of factors and assumptions. In
particular, we will need to obtain additional financing through additional
equity and/or debt financings or through the sale of assets (including our
intellectual property) during fiscal year 2005. If we raise additional funds
through the issuance of equity securities or other financing instruments, which
are convertible for equity securities, our shareholders may experience
significant dilution that would aversely affect the price of our common stock.
Furthermore, there can be no assurance that additional financing will be
available when needed or at all, or that if available, such financing will be on
terms favorable to us or our shareholders. If financing is not available when
required or is not available on acceptable terms, we may be required to curtail
our operating plan and will likely not be able to continue operations as a going
concern.

         We do not have sufficient capital to cover: 1) the expected costs of
additional clinical studies currently required by the FDA; or 2) the anticipated
expense of funding our business plan over the next year. We will not be able to
continue our business operations unless we obtain additional capital
immediately. This capital, if obtained, could be generated through issuance of
securities, assumption of loans, sale of assets (including our intellectual
property); however, we have only limited commitments for any capital infusion,
and can give no assurance that we will be able to raise any such capital.
Furthermore, our troubled financial condition, as well as the lack of FDA
pre-market approval of the BCS2100 have made it difficult if not impossible to
raise capital needed to continue our operations. If we are not successful in
quickly raising additional capital, we will have to scale back our business plan
or discontinue operations.

         As of March 31, 2005, we believed that we had sufficient liquidity to
sustain current operations for next two months. Our monthly expense rate at that
time averaged $20 thousand, we had cash, marketable securities, accounts
receivable and pre-paid expenses of approximately $2 thousand and current
liabilities (excluding the debenture and deferred revenue) of approximately $912
thousand. On a short-term basis, we believed we would be able to fund our
operations with cash on hand and the proceeds of our receivables and current
sales activities; however, to fund our operations over the long term (more than
2 months) we believed we would need to raise additional capital or curtail our
operation.

                                       18


<PAGE>

ITEM 3. CONTROLS AND PROCEDURES

         (a) Based on the evaluation of our "disclosure controls and procedures"
(as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) or 15d-15(e))
required by paragraph (b) of Rules 13a-15 or 15d-15, our president and our chief
financial officer have concluded that, as of June 30, 2004, our disclosure
controls and procedures were effective.

         (b) We are not presently required to conduct quarterly evaluations of
our internal control over financial reporting pursuant to paragraph (d) of Rules
13a-15 or 15d-15 promulgated under the Exchange Act. We are, however, in the
process of designing, evaluating and implementing internal controls in
anticipation of the date when we will become subject to such evaluation
requirements.

PART II -- OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

SEC INVESTIGATION

         In December 2002, we were requested to provide certain documents to the
SEC and the U.S. Department of Justice in connection with an investigation
regarding possible violations of the insider trading prohibitions found in the
federal securities laws. We have responded to the Commission's requests for
copies of documentation, and members of CTI management have provided testimony
to the Commission. To date, we have incurred approximately $650,000 in legal
costs in complying with these requests. CTI also may be required to indemnify
its officers and directors in connection with fees incurred in connection with
these investigations. Our efforts to respond to the Commission's requests have
required, and in the future may require, significant additional legal expenses,
may make fund raising more difficult if not impossible, and will distract
management from our day-to-day operations.

INDEMNIFICATION

       Under our bylaws and contractual agreements, CTI may be required to
indemnify its current and former officers and directors who are parties to
litigation or other proceedings by providing legal defense through the CTI
attorneys (or reimbursing the parties for their own attorneys) and covering all
damages the parties may suffer if the plaintiffs are successful.

OTHER LEGAL PROCEEDINGS

       We are involved in certain other litigation matters in the normal course
of business which management currently believes are not likely to result in any
material adverse effects on our financial position, results of operations, or
net cash flows.


                                       19


<PAGE>

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)      EXHIBITS

         31.1     Certification of Chief Executive Officer
         31.2     Certification of Chief Financial Officer
         32.1     Certification of Chief Executive Officer
         32.2     Certification of Chief Financial Officer

(b)      REPORTS ON FORM 8-K (NONE)


                                       20


<PAGE>


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

COMPUTERIZED THERMAL IMAGING, INC.
(Registrant)

/s/Richard V. Secord
----------------------------------
Richard V. Secord
Chairman & Chief Executive Officer

May 20, 2005


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