SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                   FORM 10-QSB

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

              For the quarterly period ended September 30, 2006 or

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


For the transition period from _______________ to ____________________

Commission File Number: 34-00031307


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

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

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

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

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant 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]



As of November 20, 2006, 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
Condensed Balance Sheets                                                     3
Condensed Statements of Operations                                           5
Condensed Statement of Changes in Stockholders' Deficiency                   6
Condensed Statements of Cash Flows                                           7
Notes to Condensed Financial Statements                                      8
Item 2 - Management's Discussion and Analysis of
         Financial Condition and Results of Operations                      11
Item 3 - Controls and Procedures                                            16
PART II - OTHER INFORMATION                                                 17
Item 1 - Legal Proceedings                                                  17
Item 2 - Changes in Securities                                              17
Item 3 - Defaults Upon Senior Securities                                    17
Item 4 - Submission of Matters to a Vote of Security Holders                17
Item 5 - Other Information                                                  17
Item 6 - Exhibits and Reports on Form 8-K                                   17
SIGNATURES                                                                  19
EXHIBIT 31.1 - CERTIFICATION                                                20
EXHIBIT 32.1 - ADDITIONAL CERTIFICATION                                     21









                                          PART I - FINANCIAL INFORMATION


ITEM 1 - FINANCIAL STATEMENTS


                                      -2-
<PAGE>

<TABLE>
<CAPTION>

                      IMAGE TECHNOLOGY LABORATORIES, INC.


                            Condensed Balance Sheets

                                                                        SEPTEMBER 30, 2006  DECEMBER 31, 2005
                                                                            (UNAUDITED)
 ASSETS

CURRENT ASSETS:
<S>                                                                        <C>              <C>
 Cash and cash equivalents                                                 $    12,105      $    40,698
 Accounts receivable                                                           195,447          112,201
 Prepaid expenses and other current assets                                      10,541            7,460
                                                                           -----------      -----------

   TOTAL CURRENT ASSETS                                                        218,093          160,359

 Equipment and improvements, net                                               131,728          171,257
 Rent - deposit                                                                  1,496            1,496
                                                                           -----------      -----------

   TOTAL ASSETS                                                            $   351,317      $   333,112
                                                                           ===========      ===========

LIABILITIES AND STOCKHOLDERS' DEFICIENCY

CURRENT LIABILITIES:
 Loan payable to stockholder                                               $    50,000      $    50,000
 Loan: Bank line of credit                                                      70,354           59,350
 Current portion of long-term debt                                                   0           93,453
 Current portion of notes payable to stockholders                                    0            3,400
 Accrued Phelps arbitration award                                                    0          130,060
 Accounts payable and accrued expenses                                         194,867          210,529
 Accrued compensation payable to stockholders                                  121,723           53,411
                                                                           -----------      -----------

   TOTAL CURRENT LIABILITIES                                                   436,944          600,203

Long-term debt, less current portion                                                 0           21,160
Notes payable to stockholders, less current portion                                  0          141,000
Accrued compensation payable to stockholders, less current portion                   0           27,072
                                                                           -----------      -----------

   TOTAL LIABILITIES                                                           436,944          789,435
                                                                           -----------      -----------

STOCKHOLDERS' DEFICIENCY:
 Preferred stock, par value $.01 per share; 5,000,000 shares authorized;
   1,500,000 shares issued and outstanding, Series A                            15,000           15,000
   1,000 shares issued and outstanding, Series B                                    10

 Common stock, par value $.01 per share; 50,000,000 shares authorized;
   15,238,778 and 15,238,778 shares issued and outstanding                     152,388          152,388

 Additional paid-in capital                                                  3,605,533        3,157,547
 Accumulated deficit                                                        (3,858,558)      (3,781,258)
                                                                           -----------      -----------

   TOTAL STOCKHOLDERS' DEFICIENCY
                                                                               (85,627)        (456,323)
                                                                           -----------      -----------

   TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY                          $   351,317      $   333,112
                                                                           ===========      ===========

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

</TABLE>



                                      -3-
<PAGE>

<TABLE>
<CAPTION>

                       IMAGE TECHNOLOGY LABORATORIES, INC.


                       CONDENSED STATEMENTS OF OPERATIONS
             THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
                                   (UNAUDITED)

                                                               THREE MONTHS                   NINE MONTHS
                                                           ENDED SEPTEMBER 30,            ENDING SEPTEMBER 30,
                                                          2006            2005            2006           2005

REVENUE:
<S>                                                   <C>             <C>             <C>             <C>
   Systems / software: license fees and sales         $     98,786    $    217,175    $    515,249    $    581,408
   Service Income                                            2,000                           9,500
                                                      ------------    ------------    ------------    ------------

            TOTAL REVENUE                                  100,786         217,175         524,749         581,408

COST OF REVENUE:                                             1,067          54,850           2,017         111,228

                                                      ------------    ------------    ------------    ------------

            GROSS PROFIT                                    99,719         162,325         522,732         470,180
                                                      ------------    ------------    ------------    ------------

COSTS AND EXPENSES:
   Research and development                                 93,196         106,817         276,421         290,052
   Sales and marketing                                       3,788          35,590          13,278          93,852
   General and administrative (includes interest
       expense of $26,388 and $30,966 for the  nine
       months ending September 30, 2006 and 2005,
       respectively;  $8,990 and $14,426 for the
       three months ending September 30,2006 and
       2005 respectively )                                  34,240         108,378         236,885         318,166
   Stock based compensation                                 24,483                          73,448
                                                      ------------    ------------    ------------    ------------

            TOTAL COSTS AND EXPENSES                       155,707         250,785         600,032         702,070
                                                      ------------    ------------    ------------    ------------

NET (LOSS)                                            $    (55,988)   $    (88,460)   $    (77,300)   $   (231,890)
                                                      ============    ============    ============    ============


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

AVERAGE NUMBER OF SHARES USED IN COMPUTATION:
   Basic and diluted                                    16,739,778      16,240,976      16,739,778      15,926,623
                                                      ============    ============    ============    ============





The accompanying notes are an integral part of the financial statements.
</TABLE>






                                      -4-
<PAGE>

<TABLE>
<CAPTION>

                      IMAGE TECHNOLOGY LABORATORIES, INC.


           CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIENCY
                       NINE MONTHS ENDED SEPTEMBER30, 2006
                                   (UNAUDITED)

                                  PREFERRED STOCK,ALL SERIES        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>            <C>
Balance, January 1, 2006         1,500,000    $   15,000      15,238,778    $  152,388    $ 3,157,547   $(3,781,258)   $(456,323)

 Issuance of options for
 compensation                                                                                  73,448                     73,448

 Issuance of Common Stock                                      2,309,583    $   23,095    $    207,863                   230,958

 Redemption of Common Stock and                               (2,309,583)   $  (23,095)   $   (207,863)                 (230,958)
 cancellation

 Preferred Stock Series B            1,000            10                                       374,538                   374,548

Net loss                                                                                                   (77,300)      (77,300)
                                 ---------    ----------      ----------    ----------    -----------   -----------    ---------
Balance, September 30, 2006      1,501,000    $   15,010      15,238,778    $  152,388    $ 3,605,533   $(3,858,558)   $ (85,627)
                                 =========    ==========      ==========    ==========    ===========   ===========    =========







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

</TABLE>






                                      -5-
<PAGE>

<TABLE>
<CAPTION>

                       IMAGE TECHNOLOGY LABORATORIES, INC.

                       CONDENSED STATEMENTS OF CASH FLOWS
                  NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
                                   (UNAUDITED)

                                                                   NINE MONTHS
                                                               ENDED SEPTEMBER 30,

                                                              2006        2005 (1)
OPERATING ACTIVITIES:
<S>                                                        <C>          <C>
    Net loss                                               $ (77,300)   $(231,890)
    Adjustments to reconcile net loss to net cash
      used in operating activities:
         Depreciation and amortization of equipment
            and improvements                                  43,355       41,505
         Stock based compensation                             73,448
Changes in operating assets and liabilities:
            Accounts receivable                              (83,245)    (121,151)
            Prepaid expenses and other current assets         (3,081)     (18,915)
            Accounts payable and accrued expenses           (145,724)     209,388
            Accrued compensation payable to stockholders      41,241
                                                           ---------    ---------
              NET CASH USED IN OPERATING ACTIVITIES         (151,306)    (121,063)
                                                           ---------    ---------

INVESTING ACTIVITIES - purchase of
  equipment and improvements                                  (3,826)     (30,957)
                                                           ---------    ---------

FINANCING ACTIVITIES:
    Proceeds from bank line of credit                         11,004
    Proceeds from private placement of common stock          230,958      155,000
    Redemption of common stock                              (230,958)
    Proceeds from exercise of options                                     150,000
    Proceeds from loans from stockholders                    230,148
    Repayments of notes payable and long-term debt          (114,613)    (101,619)
                                                           ---------    ---------

              NET CASH PROVIDED BY FINANCING ACTIVITIES      126,539      203,381
                                                           ---------    ---------

              NET INCREASE (DECREASE) IN CASH AND
                  CASH EQUIVALENTS                           (28,593)      51,361

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                40,698        4,212
                                                           ---------    ---------

CASH AND CASH EQUIVALENTS, END OF PERIOD                   $  12,105    $  55,573
                                                           =========    =========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
    Interest paid                                          $  32,372    $  21,594
                                                           =========    =========

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING
  AND FINANCING ACTIVITIES:
     Conversion of notes payable to stockholders
      to Preferred Stock Series B                          $ 374,548    $       0
                                                           =========    =========


1.   Certain items in the 2005 cash flow statement have been reclassified to
     conform with the 2006 presentation.

The accompanying notes are an integral part of the financial statements.
</TABLE>

                                      -6-
<PAGE>

                      IMAGE TECHNOLOGY LABORATORIES, INC.

                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE 1 - BASIS OF PRESENTATION:

               In the opinion of management, the accompanying unaudited
               condensed financial statements reflect all adjustments,
               consisting of normal recurring accruals, necessary to present
               fairly the financial position of Image Technology Laboratories,
               Inc. (the "Company") as of September 30, 2006, its results of
               operations for the three and nine months ended September 30, 2006
               and 2005, changes in stockholders' deficiency for the nine months
               ended September 30, 2006 and cash flows for the nine months ended
               September 30, 2006 and 2005. Certain terms used herein are
               defined in the audited financial statements of the Company as of
               December 31, 2005 and for the years ended December 31, 2005 and
               2004 (the "Audited Financial Statements") included in the
               Company's Annual Report on Form 10-KSB previously filed with the
               Securities and Exchange Commission (the "SEC"). Pursuant to rules
               and regulations of the SEC, certain information and disclosures
               normally included in financial statements prepared in accordance
               with accounting principles generally accepted in the United
               States of America have been condensed in or omitted from these
               financial statements unless significant changes have taken place
               since the end of the most recent fiscal year. Accordingly, the
               accompanying unaudited condensed financial statements should be
               read in conjunction with the Audited Financial Statements and the
               other information included in the Form 10-KSB.

               The results of operations for the three and nine months ended
               September 30, 2006 are not necessarily indicative of the results
               of operations to be expected for the full year ending December
               31, 2006.

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

NOTE 2 - EARNINGS (LOSS) PER SHARE:

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

               The rights of the Company's preferred and common stockholders are
               substantially equivalent. The Company has included the 1,501,000
               outstanding preferred shares from the date of their issuance in
               the weighted average number of shares outstanding in the
               computation of basic loss per share for the nine months ended
               September 30, 2006 and 2005, in accordance with the "two class"
               method of computing earnings (loss) per share set forth in SFAS
               128.


                                      -7-
<PAGE>



                      IMAGE TECHNOLOGY LABORATORIES, INC.

                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                   (UNAUDITED)


               The Company had a net loss for the three months ended September
               30, 2006 and net losses for the nine months ended September 30,
               2006 and 2005, and for the three months ended September 30, 2005.
               The assumed effects of the exercise of vested options to purchase
               2,000,000 and 1,575,000 common shares at September 30, 2006 and
               2005, respectively, and warrants to purchase 230,000 common
               shares outstanding at September 30, 2006 would be anti-dilutive
               or insignificant and, therefore, they have not been considered in
               the calculations of diluted per share amounts in the accompanying
               condensed statements of operations for those periods.



NOTE 3 - WORKING CAPITAL LOAN AGREEMENT:

               During September 2002, the Company entered into a one-year
               working capital loan agreement with a financial institution for
               borrowings of up to $75,000. The agreement automatically renews
               annually unless one of the parties gives appropriate notice for
               cancellation. Outstanding borrowings bear interest payable
               monthly at 1% above the prime rate, and are guaranteed by the
               Estate of the Company's principal stockholder, Dr. David Ryon. At
               September 30, 2006, there was $70,354 outstanding under this
               agreement.


NOTE 4 - LONG-TERM DEBT:

               In February 2004, the Company borrowed $125,000 from Valley
               Commercial Capital, LLC ("Valley"). This loan is evidenced by a
               promissory note, which provides for interest at 8% per annum and
               calls for monthly payments of principal and interest of $3,917
               through February 2, 2007. In March 2004, the Company borrowed an
               additional $138,997 from Valley, also evidenced by a promissory
               note, which provides for interest at 8% per annum and calls for
               monthly payments of principal and interest of $4,356 through
               March 29, 2007. As of September 30, 2006, the outstanding
               balances on these loans aggregated $0. The loans were secured by
               equipment owned by the Company located at two customer sites, and
               an assignment of a contract with one of these customers. In
               addition, the loans were secured by a personal guarantee of the
               Estate of Dr. David Ryon. In late August 2006, the remaining
               balance of these loans, $57,672, was paid. This payoff was funded
               by an additional loan by our largest stockholder.


NOTE 5 - NOTES PAYABLE TO STOCKHOLDERS:

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


                                      -8-
<PAGE>


                      IMAGE TECHNOLOGY LABORATORIES, INC.

                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                   (UNAUDITED)


               In March 2006, the Estate of Dr. Ryon loaned the Company an
               additional $22,500 under an amendment to the December 2004
               promissory note. In August 2006 our largest stockholder loaned
               the Company $57,672 and in September 2006 our largest stockholder
               loaned the Company an additional $153,375. In late September
               2006, the entire principal amount of $374,548 was converted into
               preferred stock (series B), and all accrued interest was
               forgiven.

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



NOTE 6 - COMMON STOCK:

               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
               thereunder. 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.

NOTE 7 - STOCK OPTIONS

               The Company did not grant any options under the Company's option
               plan during the quarter ended September 30, 2006.

               Prior to January 1, 2006 the Company measured compensation cost
               related to stock options issued to employees using the intrinsic
               value method of accounting prescribed by Accounting Principles
               Board Opinion No. 25 ("APB 25"), "Accounting For Stock Issued To
               Employees". The Company has adopted the provisions of Statement
               of Financial Accounting Standards No. 123R ("SFAS 123R"),
               "Accounting For Stock-Based Compensation." As a result of SFAS
               123R, the Company began expensing the fair value of employee
               stock options over the vesting period beginning with its fiscal
               quarter ending March 31, 2006. For the quarter ending September
               30, 2006, the Company expensed $24,483 due to stock options. For
               the quarter ending September 30, 2005, the pro forma stock option
               expense was $461,766, which would have resulted in a pro forma
               net loss of $550,226 (net loss per share of $0.01).


                                      -9-
<PAGE>



                      IMAGE TECHNOLOGY LABORATORIES, INC.

                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                   (UNAUDITED)



               The following table summarizes information about stock options
outstanding at September 30, 2006.

<TABLE>
<CAPTION>

                                                    Options Outstanding                   Options Exercisable
                                    ------------------------------------------       --------------------------
                                                       Weighted
                                        Number         Average        Weighted          Number        Weighted
                     Exercise         Outstanding     Remaining       Average         Outstanding     Average
                       Price            at Sept.     Contractual      Exercise          at Sept.      Exercise
                       RANGE           30, 2006      LIFE (YEARS)      PRICE           30, 2006        PRICE
                       -----           --------      ------------      -----           --------        -----
                    <S>                  <C>              <C>             <C>             <C>            <C>
                     $    0.33        1,000,000                       $  0.33         1,000,000      $    0.33
                     $    0.20          550,000           8.3         $  0.20           550,000      $    0.20
                     $    0.22          800,000           8.5         $  0.22           200,000      $    0.22
                     $    0.26          750,000           8.6         $  0.26           250,000      $    0.26
                                    ------------    -------------    -----------   -------------    -----------
                                      3,100,000           6.8         $  0.26         2,000,000      $    0.27
                                    ============    =============    ===========   =============    ===========
</TABLE>


                  The 25,000 $0.75 vested options of Mr. Muradian, our former
                  President/CEO, were cancelled on April 20, 2006.



                                      -10-
<PAGE>

                      IMAGE TECHNOLOGY LABORATORIES, INC.



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

                                    OVERVIEW

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

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

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

We have had recurring losses and negative cash flows from our operating
activities since inception. We have cash of $12,105 and a working capital
deficiency of $218,851 as of September 30, 2006.





                                      -11-
<PAGE>

                      IMAGE TECHNOLOGY LABORATORIES, INC.

  RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2006
        COMPARED WITH THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2005

REVENUE:

For the three months ended September 30, 2006, our total revenue was $100,786, a
decrease of $116,389 from the $217,175 in the prior year's comparable period,
For the nine months ended September 30,2006, our total revenue was $524,749, a
$56,659 decrease from the $581,408 revenue in the prior year's comparable
period, largely attributed to variations in the billed usage fees.



COST OF REVENUE:

For the three and nine months ended September 30, 2006, direct cost of revenue
for $1,067 and $2,017 was incurred. For the three and nine months ending
September 30,2005, our cost of revenue was $54,850 and $111,228, a decrease of
$53,783 and $109,211 from the prior year's comparable periods, largely
attributable to a lack of systems hardware purchases during this period.


SALES AND MARKETING EXPENSES:

During the three months ended September 30, 2006, we incurred sales and
marketing expenses of $3,788, as compared with sales and marketing expenses of
$35,590 during the same period of 2005, a decrease of $31,802. 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. During the nine months ended September 30, 2006 we
incurred sales and marketing expenses of $13,278, as compared with sales and
marketing expenses of $93,852 during the same period of 2005, a decrease of
$80,574.


NET LOSS:

We incurred a net loss of $55,988 (less than $.01 per share) for the three
months ended September 30, 2006 as compared with a loss of $88,460 for the three
months ended September 30, 2005. Net loss for the nine months ended September
30, 2006 was $77,300 as compared with a net loss of $231,890 for the same period
in 2005. The Company continues to aggressively manage costs while it focuses on
increasing revenues from sales of systems / software



                                      -12-
<PAGE>


                      IMAGE TECHNOLOGY LABORATORIES, INC.

                         LIQUIDITY AND CAPITAL RESOURCES


At September 30, 2006, our total assets were $351,317, an increase of $18,205
from total assets of $333,112 on December 31, 2005.

As of September 30, 2006, we had cash and cash equivalents and a working capital
deficiency of $12,105 and $218,851, respectively.

Net cash provided (used) in our operating activities for the 9 months ending
September 30, 2006 of ($151,306) was substantially attributable to our net loss
of $77,300 offset by $41,241 in accrued compensation payable to stockholders. Of
the net loss of $77,300, $73,448 was stock option compensation expense. The net
cash used in our operating activities was financed with $230,148 resulting from
an additional loan from the Estate of Dr. David Ryon and a net of $11,004 from
our bank line of credit. Investing activities (purchase of equipment and
improvements) for the nine months ending September 30, 2006 totaled only $3,826.

The foregoing activities, i.e., operating, investing and financing, resulted in
our net cash decrease of $28,593 for the nine months ended September 30, 2006.

During September 2002, we obtained a $75,000 working capital loan from a
financial institution. As of September 30, 2006, we have $70,354 outstanding
under that loan. Additionally, in February and March 2004, we obtained two loans
from a different financial institution that provided us with an aggregate
principal amount of approximately $264,000. As of September 30, 2006, we had $0
outstanding under these arrangements. In late August 2006, the remaining balance
of these loans, $57,672, was paid. This payoff was funded by an additional loan
by our largest stockholder.

In December 2004, we borrowed $105,000 from our former Chief Executive Officer
Dr. David Ryon, which was to be repaid over 24 months, beginning in January
2007. An additional $36,000 and $22,500 were borrowed from the Estate of Dr.
Ryon in December 2005 and March 2006, respectively. In August 2006 our largest
stockholder loaned the Company $57,672 and in September 2006 our largest
stockholder loaned the Company an additional $153,375. In late September 2006,
the entire principal amount of $374,548 was converted into preferred stock
series B and all accrued interest was forgiven.


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

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


                                      -13-
<PAGE>


                      IMAGE TECHNOLOGY LABORATORIES, INC.

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

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

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 $153,375.26 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. In September 2006, the Company's largest stockholder
loaned the Company $153,375.26, the proceeds of which were used to satisfy the
$153,375.26 settlement with Dr. Phelps. This amount, along with other previous
loans to the Company by the largest stockholder, was converted to preferred
stock series B in late September 2006.


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

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


                 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In March 2006, the Estate of Dr. Ryon loaned the Company an additional $22,500
under an amendment to the December 2004 promissory note. Additional loans were
made to the Company by the largest stockholder in August and September 2006
totaling $211,048.



                                      -14-
<PAGE>


                      IMAGE TECHNOLOGY LABORATORIES, INC.

The Company's largest shareholder has converted a total of $374,548 in debt owed
by the Company to 1000 shares of Preferred Stock Series B. Details of the terms
of Preferred Stock Series B are described in Item 2, "Changes in Securities".


                           FORWARD-LOOKING STATEMENTS

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







                                      -15-
<PAGE>


ITEM 3 - CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

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

CHANGES IN INTERNAL CONTROLS

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








                                      -16-
<PAGE>

                      IMAGE TECHNOLOGY LABORATORIES, INC.

                           PART II - OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS


By decision and judgment dated June 4, 2006, Justice Teresi of the Supreme
Court, Albany County confirmed the award of the arbitrator issued on September
4, 2004, and denied the Company's motion to vacate or modify that award with
respect to the award of attorneys' fees and expenses to Dr. Phelps. A detailed
discussion of the arbitration award was included in our Annual Report on Form
10-KSB for the fiscal year ended December 31, 2005.

In September 2006, the Company entered into a Settlement Agreement with Dr.
Phelps whereby the Company paid Dr. Phelps a total of $153,375.26, 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. Additionally, as part of the Settlement Agreement, Dr.
Phelps resold 2,309,583 shares of common stock of Image Technology Laboratories
to the Company at $0.10 per share. An 8-K was filed with the Securities and
Exchange Commission on October 4, 2006 detailing this event.


ITEM 2 - CHANGES IN SECURITIES


The net effect of the repurchase and subsequent cancellation of 2,309,583 shares
of common stock as described in Item 1 in combination with the sale of 2,309,583
shares of common stock as described in Note 6 of the financials resulted in no
change to the number of shares of common stock outstanding.



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


ITEM 3 - DEFAULTS UPON SENIOR SECURITIES

None.

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

None

ITEM 5 - OTHER INFORMATION




                                      -17-
<PAGE>

                      IMAGE TECHNOLOGY LABORATORIES, INC.

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

         (a)      EXHIBITS.

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

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


         (b) REPORTS ON FORM 8-K.

                  None.







                                      -18-
<PAGE>

                      IMAGE TECHNOLOGY LABORATORIES, INC.

                                   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 20, 2006









                                      -19-