<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 September 30, 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 [ ]

         Indicate by check mark whether the registrant is a shell company (as
Defined in rule 12b-2 of the Exchange Act). Yes [ ] No [X]

         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 October
31, 2005.

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




<TABLE>
                                         COMPUTERIZED THERMAL IMAGING, INC.

                                                     FORM 10-QSB

                                                  QUARTERLY REPORT

                                                  TABLE OF CONTENTS

                                           PART I - FINANCIAL INFORMATION

<S>  <C>                                                                                                         <C>
Item 1. Financial Statements......................................................................................2

             Condensed Consolidated Balance Sheets as of September 30, 2005 and June 30, 2005 ....................2

             Condensed Consolidated Statements of Operations for the three months ended September 30,
             2005 and 2004 .......................................................................................3

             Condensed Consolidated Statements of Cash Flows for the three months ended September 30, 2005
             and 2004.............................................................................................4

             Notes to Condensed Consolidated Financial Statements.................................................5

Item 2. Management's Discussion and Analysis or Plan of Operation.................................................9

Item 3. Controls and Procedures..................................................................................16


                                             PART II - OTHER INFORMATION

Item 4. Unregistered Sales of Equity Securities and Use of Proceeds .............................................16

Item 5. Exhibits.................................................................................................17

SIGNATURES.......................................................................................................18




<PAGE>

PART I - FINANCIAL INFORMATION
ITEM 1.  UNAUDITED FINANCIAL STATEMENTS


                            COMPUTERIZED THERMAL IMAGING, INC.
                          CONDENSED CONSOLIDATED BALANCE SHEETS
                                       (Unaudited)


                                                          September 30,       June 30,
                                                              2005              2005
                                                          ------------      ------------
ASSETS                                                    (Unaudited)

CURRENT ASSETS:
  Cash and cash equivalents                               $    240,766      $     51,688
  Accounts Receivable - trade, less allowance
    for doubtful accounts of $0 on
    September 30, 2005                                             285                40
  Inventories                                                   84,712            87,276
  Prepaid expenses                                              33,809            33,809
                                                          ------------      ------------
        Total current assets                                   359,572           172,813

PROPERTY AND EQUIPMENT, Net                                      7,231             7,525
                                                          ------------      ------------
INTANGIBLE ASSETS:
  Intellectual property rights, net (less
    accumulated amortization of accounts
    of $20,774 and $20,107 for September
    30, 2005 and June 30, 2005, respectively                    12,073            12,740
                                                          ------------      ------------
TOTAL ASSETS                                              $    378,876      $    193,078
                                                          ============      ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES:
  Accounts payable                                        $    544,700      $    558,045
  Accrued liabilities                                          548,782           555,262
  Short-term Note Payable                                      666,506           333,891
  Deferred revenues                                            666,859           669,991
                                                          ------------      ------------
        Total current liabilities                            2,426,847         2,117,189

LONG-TERM NOTE PAYABLE                                         115,442           114,181
                                                          ------------      ------------
TOTAL LIABILITIES                                            2,542,289         2,231,370
                                                          ------------      ------------

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, 114,562 issued and outstanding
    on September 30, 2005 and June 30, 2005                    114,562           114,562
  Additional paid-in capital                                95,462,474        95,462,474
  Deficit accumulated                                      (97,740,449)      (97,615,328)
                                                          ------------      ------------
        Total stockholders' equity (deficit)                (2,163,413)       (2,038,292)
                                                          ------------      ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)      $    378,876      $    193,078
                                                          ============      ============


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


                                      Page 2 of 23


<PAGE>

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


                                                                   FOR THE
                                                              THREE MONTHS ENDED
                                                                SEPTEMBER 30,
                                                      ----------------------------------
                                                          2005                 2004
                                                      -------------        -------------

INCOME:
  Product revenues                                    $      14,882        $      66,609
  Service revenues                                            7,165                9,787
                                                      -------------        -------------
Total Revenues                                               22,047               76,396
                                                      -------------        -------------

  Cost of product revenues                                   (2,670)             (13,416)
  Cost of service revenues                                   (3,654)                  --
                                                      -------------        -------------
Total cost of revenues                                       (6,324)             (13,416)
                                                      -------------        -------------

GROSS MARGIN                                                 15,723               62,980
                                                      -------------        -------------

OPERATING EXPENSES:
  Operating, general and administrative                     130,951              116,040
  Litigation settlements                                      1,000                   --
  Research and development                                       --               56,802
  Marketing                                                      --               17,566
  Depreciation and amortization                                 961                5,180
                                                      -------------        -------------

    Total operating expenses                                132,912              195,588
                                                      -------------        -------------

OPERATING LOSS                                             (117,189)            (132,608)
                                                      -------------        -------------

OTHER INCOME (EXPENSE):
  Interest income                                               956                    4
  Interest expense                                           (8,888)              (4,618)
  Other                                                          --                   20
                                                      -------------        -------------

    Total other income (expense)                             (7,932)              (4,594)
                                                      -------------        -------------

NET LOSS                                              $    (125,121)       $    (137,202)
                                                      -------------        -------------

WEIGHTED AVERAGE SHARES
  OUTSTANDING                                           114,561,698          114,561,698
                                                      =============        =============

BASIC AND DILUTED LOSS PER COMMON SHARE               $      (0.001)       $      (0.001)
                                                      =============        =============


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


                                      Page 3 of 23



<PAGE>

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

                                                                            For the
                                                                       THREE MONTHS ENDED
                                                                         SEPTEMBER 30,
                                                                    ------------------------
                                                                      2005            2004
                                                                    ---------      ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss                                                          $(125,121)     $(137,202)
  Depreciation and amortization                                           961          5,182
    Accounts receivable - trade                                          (245)       (82,377)
    Accounts receivable - other                                            --          1,391
    Inventories                                                         2,563          8,628
    Prepaid expenses                                                       --         11,802
    Accounts payable                                                  (13,345)        14,789
    Accrued liabilities                                                 2,397        (47,467)
    Deferred revenues                                                  (3,132)        84,410
                                                                    ---------      ---------
           Net cash used in operating activities                     (135,922)      (140,844)
                                                                    ---------      ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
           Net cash provided by (used in)  investing activities            --             --
                                                                    ---------      ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from loan                                                  325,000             --
                                                                    ---------      ---------
           Net cash provided by financing activities                  325,000             --
                                                                    ---------      ---------

NET INCREASE (DECREASE) IN CASH
  AND CASH EQUIVALENTS                                                189,078       (140,844)

CASH AND CASH EQUIVALENTS AT
  BEGINNING OF PERIOD                                                  51,688        168,955
                                                                    ---------      ---------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                          $ 240,766      $  28,111
                                                                    =========      =========

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


                                        Page 4 of 23
</TABLE>


<PAGE>

                       COMPUTERIZED THERMAL IMAGING, INC.
              Notes to Condensed Consolidated Financial Statements
                               September 30, 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 periods ended September 30, 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,
2005. The consolidated results of operations for the three-month period ended
September 30, 2005 is 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 it's Annual
Report on Form 10-KSB for the Year Ended June 30, 2005, 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,
or some other method.  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

                                  Page 5 of 23


<PAGE>

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 capital stock.

         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 September 30, 2005 was approximately $666,859, and
consisted of $660,000 of deferred revenues with a manufacturing/licensing
agreement between the Company and NanDa Thermal Medical Technology, Inc.
("NanDa") and $6,859 of deferred warranty revenues.


                                  Page 6 of 23


<PAGE>

-------------------------------------------------------------------------------
 DEFERRED REVENUES                  SEPTEMBER 30                  JUNE 30, 2005
-------------------------------------------------------------------------------
                                          2005                           2004
Nanda Licensing                         660,000                        660,000
Warranty Revenues                         6,859                          9,991
                                          -----                          -----
-------------------------------------------------------------------------------
                                      $ 666,859                      $ 669,991
                                      =========                      =========
-------------------------------------------------------------------------------

         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:


-------------------------------------------------------------------------------
                               SEPTEMBER 30, 2005                JUNE 30, 2005
-------------------------------------------------------------------------------
Raw materials                           $ 535,837                    $ 536,053
Inventory Reserve                       (639,664)                    (639,664)
Work in Process                                 -                            -
Finished Goods                            188,539                      190,887
-------------------------------------------------------------------------------
Total                                    $ 84,712                      $87,276
                                         ========                      =======
-------------------------------------------------------------------------------

         Finished goods inventory at September 30, 2005 consisted of
approximately $189 thousand of finished goods ready for sale, $0 in the
manufacturing process and $536 thousand of raw materials. The Company has
impaired its inventory by 88% due to the company's ability to continue as a
going concern. The impairment is held in a reserve account.

         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 September 30, 2005


                                  Page 7 of 23


<PAGE>

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 uncertainty regarding the Company's
volatility to continue as a going concern, there are no deferred tax assets.

NOTE F. CONTINGENCIES

SEC INVESTIGATION

         In December 2002, the Company was 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. The Company responded to the Commission's
requests for copies of documentation, and members of the Company's management
have provided testimony to the Commission. To date, the Company has incurred
approximately $650,000 in legal costs in complying with these requests. The
Company also may be required to indemnify its officers and directors in
connection with fees incurred in connection with these investigations. The
Company's efforts to respond to the Commission's requests has required, and in
the future may require, significant additional legal expenses, may make fund
raising more difficult if not impossible, and will divert management's attention
away from the Company's day-to-day operations.

INDEMNIFICATION

         Under its bylaws and contractual agreements, the Company 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 Company's 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

         The Company is 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 the Company's 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.


                                  Page 8 of 23


<PAGE>

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

         FORWARD-LOOKING STATEMENTS CONCERNING THE COMPANY'S BUSINESS

         The following discussion should be read in conjunction with the
Company's 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

         The company's 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. The Company designs, manufactures and
markets thermal imaging devices and provides services used for clinical
diagnosis, pain management and industrial non-destructive testing. The Company
provides inspection services and designs and builds non-destructive test systems
for industrial customers.

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

         Given the Company's inability to market its principal product unless it
secures FDA pre-market approval, the Company's need to raise capital to fund its
operations, history of losses ($97.7 million since inception), and the pending
or future litigation, the Company's independent auditor's opinion dated October
2005 contains a "going concern qualification," meaning that the Company's
independent auditors have indicated that there is substantial doubt as to the
Company's ability to continue as a going concern. The Company's efforts to raise
additional funds to date have been only marginally successful. Since the FDA's
rejection of the Company's application for pre-market approval of the BCS 2100
in December 2002, the company has raised approximately $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
$645 thousand from short-term notes. The Company has pursued additional
financing transactions, but, as of the date of this Report, the Company has been
unsuccessful in their efforts to raise additional capital. Regardless of the
FDA's ultimate decision regarding the Company's application for pre-market
approval of the BCS2100, the Company will require additional capital to execute
its operating plan, which may include more clinical trials, research and
development, marketing into Canada and marketing and manufacturing expenses.


                                  Page 9 of 23


<PAGE>

         The following discussion and analysis of the Company's consolidated
financial condition and results of operations should be read in conjunction with
the Company's audited condensed consolidated financial statements and notes
thereto contained in the Company's Annual Report on Form 10-KSB for the fiscal
year ended June 30, 2005.

         CRITICAL ACCOUNTING POLICIES

         The preparation of financial statements requires the Company 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 the
Company's 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 the Company's financial condition or results of operations.
The Company's 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.
The Company's management has discussed the development and selection of these
critical accounting policies with the Audit Committee of the Companies 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. The Company
recognizes 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.

         The Company's standard domestic terms for medical products sold to
end-user customers are "prepaid," and the Company's standard international terms
for its medical products require payment in cash or placement of a letter of
credit before shipment. On occasion, the Company offers extended payment terms
beyond its normal business practices, usually in connection with providing an
initial order of demonstration equipment to a new domestic distributor. The
Company considers fees on these extended terms agreements not fixed and
collectibility less than probable and defer the revenue until receipt of
payment. The Company sells separate extended warranty contracts for its TIP and
Photonic Stimulator and recognize revenue from those arrangements ratably over
the contract life. The Company does not offer rights or return privileges in
sales agreements.


         RESEARCH AND DEVELOPMENT EXPENSES - The Company expenses as incurred
the direct, indirect and purchased research and development costs associated
with their products. The Company believes this method is conservative given the
product and market acceptance risk inherent to the Company's products and
reduces administrative burden and cost.

         IMPAIRMENT OF LONG-LIVED ASSETS - The Company follows 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


                                 Page 10 of 23


<PAGE>

reported value of the assets, the asset is not recoverable and the company must
recognize 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 the company's 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 - 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, and then compare 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 is necessary. The Company felt no need
to impair additional inventory during the quarter ended September 30, 2005.

TRENDS/UNCERTAINTIES AFFECTING CONTINUING OPERATIONS

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

         The Company has only Internet marketing efforts at present due to the
Company's current lack of resources. If the Company is able to acquire
additional capital, of which there can be no assurance, the Company hope to be
able to resume marketing efforts by building relationships with manufacturers,
medical equipment dealers, physicians and clinical investigators; communicating
with the Company's target markets by attending trade shows and conferences,
making direct sales calls, and sponsoring clinics in which the Company could
introduce and demonstrate its products. The Company believes 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, the Company hopes 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 the Company's products.

         To date, the Company has had limited operating revenues from the sale
of its products and services ($4 million in total revenues since inception). The
Company cannot provide any assurance that it will achieve profitability in the
future. The Company's immediate priority is to produce revenue by selling
existing TIP and Photonic Stimulator inventory, then, to expand the Company's
market in Canada where the Company has obtained the necessary licenses for,
current product offerings to pursue the U.S. market for its TIP and Photonic
Stimulator; and to reconcile issues presented to the FDA in the Company's
Citizens Petition. At this time, the Company is unsure how much time and
additional financing will be required to resolve issues with the FDA. The
Company can offer no assurance that it will ever be able to resolve those FDA
issues. The Company is also unsure about their ability to raise additional
financing that will be required to continue the business operations. These
uncertainties, among others, raise doubts about the Company's ability to
continue as a going concern.


                                 Page 11 of 23


<PAGE>

FACTORS THAT MAY AFFECT FUTURE RESULTS

         The Company's 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        The Company expects to continue to incur losses, deficits, and
                  deficiencies in liquidity for the foreseeable future. Unless
                  the Company is able to finalize agreements for additional
                  capital investments.

         o        A failure to raise additional capital could cause the Company
                  to severely curtail operations, which would likely result in
                  immediate and substantial dilution to the Company
                  shareholders, or cease operations entirely, which would likely
                  eliminate any value in the Company's common stock.

         o        The volatility in the market price of the Company's common
                  stock could continue and adversely affect shareholder value.

         o        The Company can issue preferred stock or sell other securities
                  or other financing instruments, including convertible debt,
                  which would result in significant dilution to existing
                  shareholders.

         o        If the Company is unsuccessful in preventing others from using
                  its intellectual property, the Company could lose a
                  competitive advantage. If the Company's intellectual property
                  infringes the rights of other parties, it could incur damages
                  or be forced to cease using marketing or selling those
                  products.

         o        The Company does not have product liability insurance; if the
                  Company is made subject to a products liability claim, whether
                  or not the claim is meritorious, the Company's 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 the Company's
audited condensed consolidated financial statements, notes thereto and risk
factors set forth in the Company's Annual Report on Form 10-KSB for the fiscal
year ended June 30, 2005 (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 SEPTEMBER 30, 2005, COMPARED TO QUARTER ENDED SEPTEMBER 30, 2004

         REVENUES


                                 Page 12 of 23


<PAGE>

         Total revenues for the three months ended September 30, 2005 decreased
$54 thousand, down to $22 thousand from $76 thousand in September 2004. This
represents a 71% reduction in revenues. Fifteen thousand dollars of the
Company's revenues resulted from product sales and $7 from services provided in
the period ending September 30, 2005. During this same period in 2004 product
revenues were $67 thousand with service revenues coming in at $10 thousand. The
decrease in revenue was primarily attributed to the reduction in sales force and
other resources.

         There were no unfilled orders as of September 30, 2005. The Company has
not had any foreign sales in the past 3 months.


         COSTS AND EXPENSES

         Gross margins for the three months ended September 30, 2005 were $15
thousand compared to gross margins of $63 thousand for the same period of the
prior year or a 75% decrease. Total cost of revenues for September 30, 2005 was
$6 thousand, compared to $13 thousand for the same period last year: a 53%
decrease.

         The increase in gross margin resulted primarily from the significant
reduction in the Company's cost of goods sold. Cost of goods declined for
several principal reasons. First, operations were dramatically reduced, which
has resulted in significantly lower revenues, and has also has reduced cost of
goods. Second, in part as a result of the reduced level of operations, the
Company has 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.

         The Company is currently in the process of developing a revised
business structure that the Company believe will enhance revenue through leasing
of its products and providing services to the Company's customers rather than
direct sales.

         General and administrative expenses for the three months ended
September 30, 2005 were $131 thousand compared to $116 thousand for the same
period last year, an increase of $15 thousand. The increase primarily reflects
the accrual of the CEO's salary. This past quarter the Company's CEO, RV Secord,
has taken a minimal salary and the balance has been accrued.

         Depreciation and amortization expense for the three month period ended
September 30, 2005 decreased $4 thousand from $5 thousand to $1 thousand or an
81% decrease, compared to the same periods of the prior year. There was no
additional impairments in the three month period ended September 30, 2005.

         OPERATING INCOME / LOSS

         The Company recorded an operating loss of $117 thousand for the three
months ended September 30, 2005, compared to an operating loss of $132 ended
September 30, 2004. The operating loss improvement of approximately $15 thousand
for three months was due principally to the Company's receipt of revenues
resulting from an existing customers need for repairs and service on previously
purchased products, sale of the Company's Photonic Stimulator and reduction of
costs due to the Company's current lack of sales and capital funding.


                                 Page 13 of 23


<PAGE>

         OTHER INCOME

         Net interest and other expense for the three months ended
September 30, 2005 increased $3 thousand from the same period of 2004, from $5
thousand to a net expense of $8 thousand.  Interest expense is primarily an
accrual of imputed interest on five loans of $100 thousand, $200 thousand, $20
thousand, $100 thousand and $325 thousand, all to related parties. There was
virtually no interest income due to the lack of cash.

         NET INCOME/(LOSS)

         The Company recognized no extraordinary gains or losses during the
three months ended September 30, 2005, therefore, net income and operating
income were identical. The Company also recorded no income taxes or income tax
benefit due to the going concern opinion issued by the Company auditors. Because
the Company's future as an on going business is in question the Company's
ability to take advantage of a booked tax benefit is also in question.
Therefore, no benefit has been recognized. However, the Company does hope to be
able to, in the future, obtain a profitable operational status at which time the
Company could then take advantage of a net operating loss carry-forward for tax
purposes.

         The net income and loss for the three month period ended September 30,
2005 resulted in a per share income loss of less than $0.001 and loss of less
than $0.001 ended September 30, 2004.

 LIQUIDITY AND CAPITAL RESOURCES

         SOURCES AND USES OF LIQUIDITY

         The Company's sources of funds used for operations has 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 month period ended September 30, 2005 the Company's sole
source of cash was from product sales. The Company is pursuing additional
financial transactions and has received $325 thousand as debt proceeds. As of
the date of this report - none have been finalized.

         The Company's 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
reporting requirements, procurement of inventory and supply expenses associated
with the Company's efforts to manufacture and market it's medical and industrial
applications. The Company has reduced many of these costs in an effort to
preserve cash; however, most of these costs are attributable to activities that
are necessary to continue the Company's operations.

         Net cash used in operating activities for the three months ended
September 30, 2005 was $136 thousand, compared to $140 thousand of cash for the
three months ended September 30, 2004. The decrease in cash used in operating
activities was primarily a result of the Company's efforts to decrease its
expenses and cash outlays and is affected by fluctuations in accounts payable
and accrued expense balances.


                                 Page 14 of 23


<PAGE>

         As of November 1, 2005, the Company's current monthly expense rate is
approximately $40 thousand; the Company's monthly expense rate at former full
operational level was approximately $1.1 million.

         The Company has no contractual obligations or commitments as of
September 30, 2005. All rentals and leases are on a month-to-month basis.

CAPITAL REQUIREMENTS/PLAN OF OPERATION

         The Company's capital requirements have varied significantly from the
Company's estimates and will likely continue to vary from those estimates. The
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 its markets; g) competing technological and market
developments; h) the terms of any new collaborative, licensing and other
arrangements that the Company may establish; i) litigation costs; and j) costs
the Company incurs in responding to inquiries and investigations conducted by
the SEC and other governmental entities.

         Since inception, the Company has generated significant losses from
operations ($97.7 million), but only limited revenues ($4 million). The Company
has taken actions to reduce Company expenses and cash consumption; however, the
Company expect to incur additional operating losses for the indefinite future.
The Company's working capital requirements in the foreseeable future will depend
on a variety of factors and assumptions. In particular, the Company will need to
obtain additional financing through additional equity and/or debt financings or
through the sale of assets (including its intellectual property) during fiscal
year 2005. If the Company raises additional funds through the issuance of equity
securities or other financing instruments which are convertible for equity
securities, the Company shareholders may experience significant dilution that
would aversely affect the price of the Company 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 the
Company or the Company shareholders. If financing is not available when required
or is not available on acceptable terms, the Company may be required to curtail
its operating plan and will likely not be able to continue operations as a going
concern.

         The Company does 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 the Company's business plan over the next year.
The Company will not be able to continue its business operations unless it can
obtain additional capital immediately. This capital, if obtained, could be
generated through issuance of securities, assumption of loans, sale of assets
(including the Company's intellectual property); however, the Company has only
limited commitments for any capital infusion, and can give no assurance that the
Company will be able to raise any such capital. Furthermore, the Company's
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 its operations. If the Company is not successful in quickly raising
additional capital, the Company will have to scale back its business plan or
discontinue operations.


                                 Page 15 of 23


<PAGE>

         As of September 30, 2005, the Company believed that the Company had
sufficient liquidity to sustain the current level of limited operations for the
next six months. The Company's monthly expense rate at that time averaged $40
thousand. The Company had cash, marketable securities and pre-paid expenses of
approximately $241 thousand and current liabilities (excluding the debenture and
deferred revenue) of approximately $1.5 million. On a short-term basis, the
Company believed it would be able to fund the current level of limited
operations with cash on hand and the proceeds of receivables and current sales
activities; however, to fund the Company operations over the long term (more
than 6 months) the Company believes it will need to raise additional capital or
curtail its operations.

         Overall, the Company has reduced monthly cash consumption to under $40
thousand, which the Company currently believes will be adequate to sustained its
curtailed operations only through March 2006. The Company has systematically
reduced expenses by eliminating all expenditures except for those necessary to
fill orders, file regulatory reports, and seek funding. If the Company is unable
to secure additional capital, the Company will likely be forced to discontinue
operations entirely.

ITEM 3. CONTROLS AND PROCEDURES

         (a) Based on the evaluation of the Company's "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, the Company's
President and Acting Chief Financial officer have concluded that, as of
September 30, 2005, the Company's disclosure controls and procedures were
effective.

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

PART II -- OTHER INFORMATION

ITEM 4.  LEGAL PROCEEDINGS

SEC INVESTIGATION

         In December 2002, the Company was 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. The Company responded to the Commission's
requests for copies of documentation, and members of the Company management have
provided testimony to the Commission. To date, the Company has incurred
approximately $650,000 in legal costs in complying with these requests. The
Company also may be required to indemnify its officers and directors in
connection with fees incurred in connection with these investigations. The
Company's 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 divert management from the
Company day-to-day operations.

INDEMNIFICATION


                                 Page 16 of 23


<PAGE>

         Under the Company's bylaws and contractual agreements, the Company 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 Company 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

         The Company is 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 the Company's financial position,
results of operations, or net cash flows.


ITEM 5.  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




                                 Page 17 of 23


<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
----------------------------------
Dated November 14, 2005
Richard V. Secord
Chairman & Chief Executive Officer


                                 Page 18 of 23