UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

(Mark One)

|X|   QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
      OF 1934

                  For the quarterly period ended September 30, 2008 or

|_|   TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
      OF 1934

For the transition period from _______________ to ____________________

Commission File Number: 34-00031307

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

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

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

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

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant 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 large accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of
"large accelerated filer", "accelerated filer" and "smaller reporting company"
in Rule 12b-2 of the Exchange Act.
Large accelerated filer |_|                                Accelerated filer |_|
Non-accelerated filer |_|                          Smaller reporting company |X|
(Do not check if a smaller
reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes |_| No |X|

As of November 13, 2008, there were 15,238,778 shares of the registrant's common
stock outstanding.
<PAGE>

                                      INDEX

                                                                        PAGE NO.
PART I - FINANCIAL INFORMATION                                              2
Item 1 - Financial Statements                                               2
Balance Sheets                                                              3
Condensed Statements of Operations                                          4
Statement of Changes in Stockholders' Deficiency                            5
Statements of Cash Flows                                                    6
Notes to Financial Statements                                               7
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations                                        11
Item 3 - Quantitative and Qualitative Disclosures About Market Risk        16
Item 4 - Controls and Procedures                                           16
PART II - OTHER INFORMATION                                                17
Item 1 - Legal Proceedings                                                 17
Item 1A - Risk Factors                                                     17
Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds       17
Item 3 - Defaults Upon Senior Securities                                   17
Item 4 - Submission of Matters to a Vote of Security Holders               17
Item 5 - Other Information                                                 18
Item 6 - Exhibits and Reports on Form 8-K                                  18
SIGNATURES                                                                 19
EXHIBIT 31.1 - CERTIFICATION                                               20
EXHIBIT 32.1 - ADDITIONAL CERTIFICATION                                    21


                                       2
<PAGE>

                         PART I - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                    SEPTEMBER 30,   DECEMBER 31,
                                                                                        2008            2007
                                                                                     (UNAUDITED)
<S>                                                                                  <C>            <C>
ASSETS

CURRENT ASSETS:
  Cash and cash equivalents                                                          $   255,458    $   295,495
  Accounts receivable                                                                    105,336        171,492
  Prepaid expenses and other current assets                                               11,302          8,637
                                                                                     -----------    -----------
      TOTAL CURRENT ASSETS                                                               372,096        475,624
  Equipment and improvements, net                                                         91,766        136,217

  Rent - deposit                                                                           6,000          6,000
                                                                                     -----------    -----------
      TOTAL ASSETS                                                                   $   469,862    $   617,841
                                                                                     ===========    ===========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY

CURRENT LIABILITIES:
  Bank line of credit                                                                $    60,738    $    73,467
  Current portion of long-term debt                                                      120,016        111,794
  Accounts payable and accrued expenses                                                  156,246        171,933
  Deferred revenue                                                                        30,000         25,000
  Accrued compensation payable to stockholders                                            47,596         47,596
                                                                                     -----------    -----------
      TOTAL CURRENT LIABILITIES                                                          414,596        429,790
      Long-term debt, less current portion                                               395,085        486,153
      Notes payable to stockholders                                                        3,684          3,684
                                                                                     -----------    -----------
      TOTAL LIABILITIES                                                                  813,365        919,627

STOCKHOLDERS' DEFICIENCY:
  Preferred stock, par value $.01 per share; 5,000,000 shares authorized;
     Series A 1,500,000 shares issued and outstanding                                     15,000         15,000
     Cumulative Convertible Series B 1,087 and 1,000 shares issued and outstanding            10             10
  Common stock, par value $.01 per share; 50,000,000 shares authorized;
     15,238,778 shares issued and outstanding                                            152,388        152,388
  Additional paid-in capital                                                           3,779,386      3,727,945
  Accumulated deficit                                                                 (4,290,287)    (4,197,129)
                                                                                     -----------    -----------
      TOTAL STOCKHOLDERS' DEFICIENCY                                                    (343,503)      (301,786)
                                                                                     -----------    -----------
      TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY                                 $   469,862    $   617,841
                                                                                     ===========    ===========
</TABLE>

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


                                       3
<PAGE>

                       CONDENSED STATEMENTS OF OPERATIONS
             THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                  THREE MONTHS                    NINE MONTHS
                                                              ENDING SEPTEMBER 30,            ENDING SEPTEMBER 30,
                                                              2008            2007            2008            2007
                                                              ----            ----            ----            ----
<S>                                                       <C>             <C>             <C>             <C>
REVENUE:
   Systems / software: license fees and sales             $    134,202    $    131,114    $    547,261    $    338,478
   Dividend Income                                               1,284           5,087           4,873           5,087
   Service Income                                                    0               0               0             256
                                                          ------------    ------------    ------------    ------------
                         TOTAL REVENUE                         135,486         136,201         552,134         343,821

COST OF REVENUE:                                                11,809           4,209          45,287           5,150
                                                          ------------    ------------    ------------    ------------
                         GROSS PROFIT                          123,677         131,992         506,847         338,671
COSTS AND EXPENSES:

  Research and development                                      93,310         103,853         279,813         285,002
  Sales and marketing                                           17,719           4,154          25,792          11,518
  General and administrative (includes interest
    expense of $13,542 and $17,314 for the three months
    and $43,195 and $24,019 for the nine months ending
    September 30, 2008 and 2007, respectively)                  62,945         114,828         242,959         240,325
  Stock based compensation                                       2,476          24,483          51,441          73,448
                                                          ------------    ------------    ------------    ------------
                         TOTAL COSTS AND EXPENSES              176,450         247,318         600,005         610,293

NET LOSS                                                  $    (52,773)   $   (115,326)   $    (93,158)   $   (271,622)

NET LOSS PER COMMON SHARE:
  Basic and diluted                                       $      (0.00)   $      (0.01)   $      (0.01)   $      (0.02)

WEIGHTED AVERAGE SHARES OUTSTANDING:
  Basic and diluted                                         16,738,778      16,738,778      16,738,778      16,738,778
</TABLE>

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


                                       4
<PAGE>

                STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIENCY
                      NINE MONTHS ENDED SEPTEMBER 30, 2008
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                    PREFERRED STOCK
                                     SERIES A AND B          COMMON STOCK
                                 --------------------   ----------------------
                                                                                    ADDI-                        TOTAL
                                   NUMBER                 NUMBER                    TIONAL       ACCUMU-         STOCK-
                                     OF                     OF                     PAID-IN        LATED         HOLDERS'
                                   SHARES      AMOUNT     SHARES       AMOUNT      CAPITAL       DEFICIT       DEFICIENCY
                                   ------      ------     ------       ------      -------       -------       ----------
<S>                              <C>          <C>       <C>           <C>         <C>          <C>             <C>
Balance, January 1, 2008         1,501,050    $15,010   15,238,778    $152,388    $3,727,945   $(4,197,129)    $(301,786)

 Amortization of stock option
 compensation                                                                         51,441                       51,441

 Dividends on Preferred Series B        37          0                                                    0

Net loss                                                                                           (93,158)      (93,158)
                                 ---------    -------   ----------   ---------    ----------  ------------     ---------
Balance, September 30, 2008      1,501,087    $15,010   15,238,778   $ 152,388    $3,779,386  $ (4,290,287)    $(343,503)
                                 =========    =======   ==========   =========    ==========  ============     =========
</TABLE>

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


                                       5
<PAGE>

                            STATEMENTS OF CASH FLOWS

                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                NINE MONTHS
                                                                             ENDED SEPTEMBER 30
                                                                              2008         2007
<S>                                                                        <C>          <C>
OPERATING ACTIVITIES:
   Net loss                                                                $ (93,158)   $(271,622)
   Adjustments to reconcile net loss to net cash provided
     (used) in operating activities: Depreciation and amortization of
        equipment
            and improvements                                                  44,451       42,408
        Stock based compensation                                              51,441       73,448
        Changes in operating assets and liabilities:
            Accounts receivable                                               66,156       84,005
            Prepaid expenses and other current assets                         (2,666)       1,966
            Accounts payable and accrued expenses                            (15,686)     (20,606)
            Deferred revenue                                                   5,000
            Accrued compensation payable to stockholders                                   (8,126)
                                                                           ---------    ---------
                NET CASH PROVIDED (USED) IN OPERATING ACTIVITIES              55,538      (98,527)
                                                                           ---------    ---------
INVESTING ACTIVITIES - PURCHASE OF EQUIPMENT AND IMPROVEMENTS                      0      (79,702)

FINANCING ACTIVITIES:
   Proceeds from (repayments of) Bank Line of Credit, net                    (12,729)       1,421
   Proceeds from (repayment of) notes payable and long term debt             (82,847)     574,281
   Proceeds from loans from stockholders                                           0        3,684
                                                                           ---------    ---------
                NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES             (95,576)     579,386
                                                                           ---------    ---------
                NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS         (40,037)     401,157

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                               295,495        3,263
                                                                           ---------    ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD                                   $ 255,458    $ 404,420
                                                                           =========    =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
   Interest paid                                                           $  43,195    $  24,018
                                                                           =========    =========
</TABLE>

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


                                       6
<PAGE>

                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)

NOTE 1 - BASIS OF PRESENTATION:

In the opinion of management, the accompanying unaudited financial statements
reflect all adjustments, consisting of normal recurring accruals, necessary to
present fairly the financial position of Image Technology Laboratories, Inc.
(the "Company") as of September 30, 2008, its results of operations for the
three and nine month periods ended September 30, 2008 and 2007, changes in
stockholders' deficiency for the nine months ended September 30, 2008 and cash
flows for the nine months ended September 30, 2008 and 2007. Certain terms used
herein are defined in the audited financial statements of the Company as of
December 31, 2007 and for the years ended December 31, 2007 and 2006 (the
"Audited Financial Statements") included in the Company's 2007 Annual Report on
Form 10-KSB previously filed with the Securities and Exchange Commission (the
"SEC"). Pursuant to rules and regulations of the SEC, certain information and
disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States of America
have been omitted from these financial statements unless significant changes
have taken place since the end of the most recent fiscal year. Accordingly, the
accompanying unaudited financial statements should be read in conjunction with
the Audited Financial Statements and notes thereto included in the 2007 Form
10-KSB.

The results of operations for the three months and nine months ended September
30, 2008 are not necessarily indicative of the results of operations to be
expected for the full year ending December 31, 2008.

These unaudited financial statements have been prepared assuming that the
Company will continue as a going concern and, accordingly, do not include any
adjustments that might result from the outcome of this uncertainty. The
Company's independent registered public accounting firm's report on the
financial statements included in the Company's Annual Report on Form 10-KSB for
the year ended December 31, 2007, contained an explanatory paragraph regarding
the Company's ability to continue as a going concern.

RECENT ACCOUNTING STANDARDS

In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements"
("SFAS No. 157"). SFAS No. 157 established a common definition for fair value to
be applied to U.S. GAAP guidance requiring use of fair value, established a
framework for measuring fair value, and expanded disclosure about such fair
value measurements. SFAS No. 157 became effective for our financial assets and
liabilities on January 1, 2008. The FASB has deferred the implementation of the
provisions of SFAS No. 157 relating to certain nonfinancial assets and
liabilities until January 1, 2009. SFAS No. 157 did not materially affect how we
determine fair value.

In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities Including an Amendment of SFAS No.
115 " ("SFAS No. 159"). This standard permits entities to choose to measure many
financial instruments and certain warranty and insurance contracts at fair value
on a contract-by-contract basis. SFAS No. 159 became effective on January 1,
2008. We have not elected the fair value option for any of our existing
financial instruments on the effective date and have not determined whether or
not we will elect this option for any eligible financial instruments we acquire
in the future.

In December 2007, the FASB issued SFAS No. 141(R), "Business Combinations,"
("SFAS No. 141(R)") and SFAS No. 160, "Noncontrolling Interests in Consolidated
Financial Statements" ("SFAS No. 160"). Effective for the Company as of January
1, 2009, SFAS No. 141(R) requires the acquiring entity in a business combination
to recognize all (and only) the assets acquired and liabilities assumed in the
transaction; establishes the acquisition-date fair value as the measurement
objective for all assets acquired and liabilities assumed; and requires the
acquirer to disclose to investors and other users all of the information they
need to evaluate and understand the nature and financial effect of the business
combination. Effective January 1, 2009, SFAS No. 160 requires all entities to
report noncontrolling (minority) interests in subsidiaries as equity in the
consolidated financial statements. Moreover, SFAS No. 160 eliminates the
diversity that currently exists in accounting for transactions between an entity
and noncontrolling interests by requiring they be treated as equity
transactions. Management is evaluating the impact of adopting SFAS No. 141(R)
and SFAS No. 160, if any, on the Company's financial statements.


                                       7
<PAGE>

In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative
Instruments and Hedging Activities - an Amendment of FASB Statement No. 133"
("SFAS No. 161"). SFAS No. 161 expands the disclosure requirements in SFAS No.
133, regarding an entity's derivative instruments and hedging activities. SFAS
No. 161 is effective on January 1, 2009. Management is evaluating the impact of
adopting SFAS No. 161, if any, on the Company's financial statements.

NOTE 2 - LOSS PER SHARE:

The Company presents "basic" earnings (loss) per common share and, if
applicable, "diluted" earnings (loss) per common share pursuant to the
provisions of Statement of Financial Accounting Standards No. 128, "Earnings per
Share" ("SFAS 128"). Basic earnings (loss) per common share is calculated by
dividing net income or loss applicable to common stock by the weighted average
number of common shares outstanding during each period. The calculation of
diluted earnings (loss) per common share is similar to that of basic earnings
(loss) per common share, except that the denominator is increased to include the
number of additional common shares that would have been outstanding if all
potentially dilutive common shares, such as those issuable upon the exercise of
stock options and warrants, were issued during the period. The rights of the
Company's preferred and common stockholders are substantially equivalent. The
Company has included the 1,500,000 Preferred Series A shares outstanding in the
weighted average number of common shares outstanding in the computation of basic
loss per share for the year ended December 31, 2007 in accordance with the "two
class" method of computing earnings (loss) per share set forth in SFAS 128.

Since the Company had a net loss for the three months and nine months ended
September 30, 2008, the assumed effects of the exercise of outstanding options,
warrants or the conversion of preferred stock into common shares at September
30, 2008 were not considered in the computation of loss per share as they would
have been anti-dilutive.

Potential common shares outstanding as of September 30, 2008 and 2007:

                                      September 30, 2008      September 30, 2007
Warrants                                         230,000                 230,000
Options                                        3,100,000               3,100,000
Conversion of Preferred Series B               2,934,900               2,799,900

As of September 30, 2008 and 2007, potentially dilutive shares totaled 6,264,900
and 6,129,900 respectively.

NOTE 3 - WORKING CAPITAL LOAN AGREEMENT:

During September 2002, the Company entered into a one-year working capital loan
agreement with a financial institution for borrowings of up to $75,000. The
agreement automatically renews annually unless one of the parties gives
appropriate notice for cancellation. Outstanding borrowings bear interest
payable monthly at 1% above the prime rate, and are guaranteed by the Estate of
the Company's former principal stockholder. At September 30, 2008, there was
$60,738 outstanding under this agreement.


                                       8
<PAGE>

In June 2007, the Company entered into a five-year Accounts Receivable loan
agreement with PowerLease Solutions, LLC and NetBank to borrow $650,000 at a
9.5% annual interest rate. Monthly payments are $13,651 and the loan is
co-signed by the Company's principal stockholder. As of September 30, 2008,
there was $515,101 outstanding under this agreement.

NOTE 4 - NOTES PAYABLE TO STOCKHOLDERS:

During November and December 2004, Dr. David Ryon, the Company's principal
stockholder, President, and Chief Executive Officer, until his death in December
2004, loaned the Company an aggregate of $105,000. In December 2004, to
memorialize this loan, he executed, as President and Chief Executive Officer, on
behalf of the Company, a demand promissory note payable to himself and bearing
interest at 10% per annum. He also executed a security agreement, for himself on
behalf of the Company, granting to himself a security interest in all of the
Company's assets not previously encumbered as security for full payment under
the note. Prior to April 12, 2005, the Company negotiated with the Estate of Dr.
David Ryon a 24-month payment schedule, beginning in January 2006. The Company's
Board of Directors approved the revised terms of the promissory note on April
12, 2005. In December 2005, the Estate of Dr. Ryon loaned the Company an
additional $36,000 under an amendment to the December 2004 promissory note and
the payment schedule was renegotiated to begin in January 2007. Additional
amounts were loaned to the Company in March 2006 for $22,500, in August 2006 for
$57,672 and in September 2006 for $153,375. These amounts, along with other
previous loans to the Company by the largest stockholder totaling $374,548 were
converted to 1000 shares of Cumulative Convertible Preferred Stock Series B in
late September 2006, and all accrued interest was forgiven. Cumulative
Convertible Preferred Stock Series B can be converted to common stock of Image
Technology Laboratories at a ratio of one share of Cumulative Convertible
Preferred Stock Series B to 2,700 shares of common stock. Either the stockholder
or the Company may elect to force conversion after two years from issuance in
units of 100 shares of Cumulative Convertible Preferred Stock Series B. The
Company may also elect to repurchase the Cumulative Convertible Preferred Stock
Series B in units of 100 shares of Cumulative Convertible Preferred Stock Series
B at any time for $432 per share of Cumulative Convertible Preferred Stock
Series B. Fixed dividend is accumulated as 12.5 additional shares of Cumulative
Convertible Preferred Stock Series B per quarter. The underlying common stock,
should the Company or shareholder elect to convert, is unregistered. The voting
rights are set at one vote per share of Cumulative Convertible Preferred Stock
Series B. The issuance described above was made in reliance upon the exemptions
from registration set forth in Section 4(2) of the Securities Act relating to
sales by an issuer not involving any public offering. None of the foregoing
transactions involved a distribution or public offering. No underwriters were
engaged in connection with the foregoing issuances of securities, and no
underwriting commissions or discounts were paid. At September 30, 2008, 1,087
shares of Preferred Stock Series B are outstanding. Such shares may be converted
at the option of the holder or the Company to 2,934,900 shares of Common stock
beginning in September 2008. Prior to conversion, such shares may be redeemed by
the Company at $432 per share or $469,584 at any time until forced conversion by
either party into Common stock.

In September 2005, the Company borrowed $50,000 from a member of the Company's
Board of Directors as part of a Bridge Loan Agreement that included the issuance
of warrants to purchase 50,000 shares of Common Stock of the Company. The
five-year warrants have an exercise price of $0.33 per share. The Bridge Loan
had an annual interest rate of 14%. The principal of $50,000 was repaid in July
2007; $5,000 of the accrued interest was paid in September 2007 and a final
accrued interest payment of $5,000 was made in March 2008.


                                       9
<PAGE>

NOTE 5 - STOCK OPTIONS

The Company did not grant any options under the Company's option plan during the
nine-month period ended September 30, 2008.

In accordance with the provisions of Statement of Financial Accounting Standards
No. 123R, the Company expenses the fair value of employee stock options over the
vesting period of such options. Amortization of stock compensation was $51,441
and $73,449 for the nine month periods ended September 30, 2008 and 20007,
respectively ($2,476 and $24,483 for the three month periods ended September 30,
2008 and 2007).

NOTE 6 - WARRANTS

As of September 30, 2008, the Company had 230,000 warrants outstanding at an
exercise price of $0.33 per share. The warrants expire in 2010.

NOTE 7 - FIXED DIVIDENDS

The Company's largest stockholder accumulated 12 additional shares of Cumulative
Convertible Preferred Stock Series B on January 1, 2008 as Fixed Dividends. An
additional 13 shares were accumulated on April 1, 2008 and 12 shares were
accumulated on July 1, 2008.


                                       10
<PAGE>

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

                                    OVERVIEW

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

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

We expect that we will derive our future revenues primarily from sales of our
WarpSpeed system and associated maintenance charges along with Application
Service Provider (ASP) usage fees. We obtained our first contract for the sale
of WarpSpeed and related hardware and maintenance services in August 2002. We
continue to refine and enhance the capabilities of our WarpSpeed system.

With the exception of the quarter ending March 31, 2008, we have had recurring
losses and negative cash flows from our operating activities since inception. We
have cash of $255,458 and a working capital deficit of $42,500 as of September
30, 2008.


                                       11
<PAGE>

  RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2008
        COMPARED WITH THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007

REVENUE:

For the three months ended September 30, 2008, our total revenue was $135,486, a
slight decrease from the $136,201 in the year's comparable period. For the nine
months ended September 30, 2008, our total revenue was $552,134, a $208,313
increase from the $343,821 revenue in the prior year's comparable period,
largely attributed to additional ASP usage fees and sales of enhancements to our
existing customer base.

COST OF REVENUE:

For the three and nine months ended September 30, 2008, direct cost of revenue
was $11,809 and $45,287, which includes depreciation associated with equipment
used in our ASP installations. For the three and nine months ending September
30, 2007, our cost of revenue was $ 4,209 and $5,150, which did not include
depreciation associated with equipment used in our ASP installations.

SALES AND MARKETING EXPENSES:

During the three months ended September 30, 2008, we incurred sales and
marketing expenses of $17,719, as compared with sales and marketing expenses of
$4,154 during the same period of 2007. During the nine months ended September
30, 2008 we incurred sales and marketing expenses of $25,792, as compared with
sales and marketing expenses of $11,518 during the same period of 2007, a
increase of $14,274. The Company has focused its efforts on controlling costs
while identifying appropriate sales personnel and resources. These costs are
expected to grow as the company executes its business plan.

NET LOSS:

We realized a net loss of $52,773 for the three months ended September 30, 2008
as compared with a loss of $115,326 for the three months ended September 30,
2007. Net loss for the nine months ended September 30, 2008 was $93,158 as
compared with a net loss of $271,622 for the same period in 2007. The Company
continues to aggressively manage costs while it focuses on increasing revenues
from sales of systems / software.


                                       12
<PAGE>

                         LIQUIDITY AND CAPITAL RESOURCES

At September 30, 2008, our total assets were $469,862, a decrease of $147,979
from total assets of $617,841 on December 31, 2007.

As of September 30, 2008, we had cash and cash equivalents and a working capital
deficit of $255,458 and $42,500, respectively

Net cash provided by our operating activities for the nine months ending
September 30, 2008 of $55,538 was substantially attributable to non-cash charges
and a decrease in accounts receivable of $66,156 offset by a decrease in
accounts payable of $15,686. The net cash used in financing activities included
$12,729 for repayment of our bank line of credit and $82,846 for repayment of
our accounts receivable loan.

The foregoing activities, i.e., operating and financing, resulted in our net
cash decrease of $40,037 for the nine months ended September 30, 2008.

In September 2002, we applied for, and received, a line of credit from M & T
Bank, renewable annually, in the amount of $75,000. As of September 30, 2008, we
have $60,738 outstanding under that loan.

In September 2005, the Company borrowed $50,000 from a member of the Company's
Board of Directors as part of a Bridge Loan Agreement that included the issuance
of warrants to purchase 50,000 shares of Common Stock of the Company. The
five-year warrants have an exercise price of $0.33 per share. The Bridge Loan
had an annual interest rate of 14%. The principal of $50,000 was repaid in July
2007; $5,000 of the accrued interest was paid in September 2007 and a final
accrued interest payment of $5,000 was made in March 2008.

In December 2005, our largest stockholder loaned the Company an additional
$36,000 under an amendment to the December 2004 promissory note. An additional
$22,500 was borrowed from our largest stockholder in March 2006. These amounts
were converted to Cumulative Convertible Preferred Series B stock issued to our
largest stockholder in late September 2006.

In September 2006, the Company entered into a settlement agreement with Dr.
Carlton Phelps, our former vice president of finance and administration, chief
financial officer, secretary and treasurer. Pursuant to the Settlement
Agreement, the Company paid Dr. Phelps a total of $153,375 consisting of
attorneys' fees awarded by the arbitrator and confirmed by the court plus
interest calculated at a rate of nine percent per annum from September 4, 2004
until September 1, 2006. The Company filed an 8-K detailing this event with the
Securities and Exchange Commission on October 4, 2006. In September 2006, the
Company's largest stockholder loaned the Company $153,375, the proceeds of which
were used to satisfy the $153,375 settlement with Dr. Phelps. This amount was
converted to Cumulative Convertible Preferred Series B stock issued to our
largest stockholder in late September 2006.

In June 2007, the Company entered into a five-year Accounts Receivable loan
agreement with PowerLease Solutions, LLC and NetBank to borrow $650,000 at a
9.5% annual interest rate. Monthly payments are $13,651 and the loan is
co-signed by the Company's principal stockholder. As of June 30, 2008, there was
$515,101 outstanding under this agreement. Fixed fees paid during 2007 to
PowerLease were $10,402.

We require cash to fund our working capital needs and capital expenditures, as
well as to meet existing commitments. Such commitments include payments of
existing loans including our line of credit, and $3,000 per month pursuant to a
five-year lease commitment ending in December 2012 for our operations center in
Kingston, New York. At times, in order to help in maximizing our working
capital, our directors, officers and employees have contributed to capital or
deferred compensation due under their agreements. It is anticipated, but not
assured, that, should the need arise such contributions or deferrals might be
available to us in the future. Additionally, we are considering outside sources
of equity funds and other types of financing in order to help support our
anticipated growth. There can be no assurance that such efforts will be
successful.


                                       13
<PAGE>

Management believes that as a result of the proceeds from financing activities
in 2007, anticipated cash flow generated by sales of its WarpSpeed RIS/PACS
solution and cash flows generated from our installed ASP base, the Company will
be able to continue to meet its obligations as they become due through at least
December 31, 2008. Management also believes that if needed, the Company will be
able to obtain additional capital resources from financing through financial
institutions and other unrelated sources and/or through additional related party
loans and private placements. However, there can be no assurance that the
Company will become profitable or that financing will be available. Accordingly,
the accompanying financial statements do not include any adjustments to reflect
the possible future effects on the recoverability and classification of assets
or the amount and classification of liabilities that may result from the outcome
of this uncertainty.

                 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In September 2005, the Company borrowed $50,000 from a member of the Company's
Board of Directors as part of a Bridge Loan Agreement that included the issuance
of warrants to purchase 50,000 shares of Common Stock of the Company. The
five-year warrants have an exercise price of $0.33 per share. The Bridge Loan
had an annual interest rate of 14%. The principal of $50,000 was repaid in July
2007; $5,000 of the accrued interest was paid in September 2007 and a final
accrued interest payment of $5,000 was made in March 2008.

In December 2005, the Estate of Dr. Ryon loaned the Company an additional
$36,000 under an amendment to the December 2004 promissory note. Additional
amounts were loaned to the Company in March 2006 for $22,500, in August 2006 for
$57,672 and in September 2006 for $153,375.26. These amounts, along with other
previous loans to the Company by the largest stockholder totaling $374,548 were
converted to 1000 shares of Cumulative Convertible Preferred Series B stock in
late September 2006, and all accrued interest was forgiven. Cumulative
Convertible Preferred Stock Series B can be converted to common stock of Image
Technology Laboratories at a ratio of one share of Cumulative Convertible
Preferred Stock Series B to 2,700 shares of common stock. Either the stockholder
or the Company may elect to force conversion after two years from issuance in
units of 100 shares of Cumulative Convertible Preferred Stock Series B. The
Company may also elect to repurchase the Cumulative Convertible Preferred Stock
Series B in units of 100 shares of Cumulative Convertible Preferred Stock Series
B at any time for $432 per share of Cumulative Convertible Preferred Stock
Series B. Fixed dividend is accumulated as 12.5 additional shares of Cumulative
Convertible Preferred Stock Series B per quarter. The underlying common stock,
should the Company or shareholder elect to convert, is unregistered. The voting
rights are set at one vote per share of Cumulative Convertible Preferred Stock
Series B. The issuance described above was made in reliance upon the exemptions
from registration set forth in Section 4(2) of the Securities Act relating to
sales by an issuer not involving any public offering. None of the foregoing
transactions involved a distribution or public offering. No underwriters were
engaged in connection with the foregoing issuances of securities, and no
underwriting commissions or discounts were paid. At September 30, 2008, 1,087
shares of Preferred Stock Series B are outstanding. Such shares may be converted
at the option of the holder or the Company to 2,934,900 shares of Common stock
beginning in September 2008. Prior to conversion, such shares may be redeemed by
the Company at $432 per share or $469,584 at any time until forced conversion by
either party into Common stock.

In September 2006, the Company entered into a settlement agreement with Dr.
Carlton Phelps, our former vice president of finance and administration, chief
financial officer, secretary and treasurer. Pursuant to the Settlement
Agreement, the Company paid Dr. Phelps a total of $153,375 consisting of
attorneys' fees awarded by the arbitrator and confirmed by the court plus
interest calculated at a rate of nine percent per annum from September 4, 2004
until September 1, 2006. The Company filed an 8-K detailing this event with the
Securities and Exchange Commission on October 4, 2006.


                                       14
<PAGE>

In September of 2006, the Company sold 2,309,583 shares of common stock at a
price of $0.10 to a group of seven accredited investors in a private placement
under Section 4(2) of the Securities Act of 1933, as amended, and Rule 506 of
Regulation D there under. These unregistered shares of common stock were issued
with registration rights. The proceeds of this sale of common stock were used to
repurchase 2,309,583 shares of common stock at a price of $0.10 from Dr. Carlton
Phelps, our former vice president of finance, chief financial officer, secretary
and treasurer. The 2,309,583 shares of stock repurchased from Dr. Phelps by the
Company were cancelled upon their tender. An 8-K was filed with the Securities
and Exchange Commission on October 4, 2006. The net effect of the repurchase and
subsequent cancellation of 2,309,583 shares of common stock as described above
in combination with the sale of 2,309,583 shares of common stock as described
above resulted in no change to the number of shares of common stock outstanding
due to this transaction.

                           FORWARD-LOOKING STATEMENTS

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


                                       15
<PAGE>

ITEM 3 - QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4 - CONTROLS AND PROCEDURES

(A) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

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

(B) CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

During the most recently completed fiscal quarter, there has been no change in
our internal control over financial reporting that has materially affected, or
is reasonably likely to materially affect, our internal control over financial
reporting.


                                       16
<PAGE>

                           PART II - OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS

None.

ITEM 1A - RISK FACTORS

Not applicable.

ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The Company converted a total of $374,548 of debt owed to our largest
shareholder to 1000 shares of Image Technology Laboratories Cumulative
Convertible Preferred Stock Series B issued to same stockholder in late
September 2006. Cumulative Convertible Preferred Stock Series B can be converted
to common stock of Image Technology Laboratories at a ratio of one share of
Cumulative Convertible Preferred Stock Series B to 2,700 shares of common stock.
Either the stockholder or the Company may elect to force conversion after two
years in units of 100 shares of Cumulative Convertible Preferred Stock Series B.
The Company may also elect to repurchase the Cumulative Convertible Preferred
Stock Series B in units of 100 shares of Cumulative Convertible Preferred Stock
Series B at any time for $432 per share of Cumulative Convertible Preferred
Stock Series B. Fixed dividend is accumulated as 12.5 additional shares of
Cumulative Convertible Preferred Stock Series B per quarter. The underlying
common stock, should the Company or stockholder elect to convert, is
unregistered. The voting rights are set at one vote per share of Cumulative
Convertible Preferred Stock Series B.

The issuances described above were made in reliance upon the exemptions from
registration set forth in Section 4(2) of the Securities Act relating to sales
by an issuer not involving any public offering. None of the foregoing
transactions involved a distribution or public offering. No underwriters were
engaged in connection with the foregoing issuances of securities, and no
underwriting commissions or discounts were paid.

Our largest stockholder accumulated 12 additional shares of Cumulative
Convertible Preferred Stock Series B on July 1, 2008 under the terms described
above as Fixed Dividends.

At September 30, 2008, 1,087 shares of Preferred Stock Series B are outstanding.
Such shares may be converted at the option of the holder or the Company to
2,934,900 shares of Common stock beginning in September 2008. Prior to
conversion, such shares may be redeemed by the Company at $432 per share or
$469,584 at any time until forced conversion by either party into Common stock.

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.


                                       17
<PAGE>

ITEM 5 - OTHER INFORMATION

None.

ITEM 6 - EXHIBITS

         EXHIBITS.

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

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


                                       18
<PAGE>

                                   SIGNATURES

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

                              /S/ LEWIS M. EDWARDS
                              -----------------------
                              LEWIS M. EDWARDS,
                              CHAIRMAN,
                              EXECUTIVE VICE-PRESIDENT,
                              CHIEF TECHNOLOGY OFFICER, AND
                              PRINCIPAL ACCOUNTING OFFICER
                              NOVEMBER 14, 2008