IMAGE TECHNOLOGY LABORATORIES, INC.




                       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 June 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 August 16, 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                                           4
Condensed Statement of Changes in Stockholders' Deficiency                   5
Condensed Statements of Cash Flows                                           6
Notes to Condensed Financial Statements                                      7
Item 2 - Management's Discussion and Analysis of Financial
  Condition and Results of Operations                                       10
Item 3 - Controls and Procedures                                            14
PART II - OTHER INFORMATION                                                 15
Item 1 - Legal Proceedings                                                  15
Item 2 - Changes in Securities                                              15
Item 3 - Defaults Upon Senior Securities                                    15
Item 4 - Submission of Matters to a Vote of Security Holders                15
Item 5 - Other Information                                                  15
Item 6 - Exhibits and Reports on Form 8-K                                   15
SIGNATURES                                                                  16
EXHIBIT 31.1 - CERTIFICATION                                                17
EXHIBIT 32.1 - ADDITIONAL CERTIFICATION                                     18














                         PART I - FINANCIAL INFORMATION



ITEM 1 - FINANCIAL STATEMENTS




                                      -2-
<PAGE>



<TABLE>
<CAPTION>

                            CONDENSED BALANCE SHEETS


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

CURRENT ASSETS:

<S>                                                           <C>            <C>
 Cash and cash equivalents                                    $    27,481    $    40,698
 Accounts receivable                                              220,619        112,201
 Prepaid expenses and other current assets                         10,217          7,460
                                                              -----------    -----------

    TOTAL CURRENT ASSETS                                          258,317        160,359

 Equipment and improvements, net                                  144,160        171,257
 Rent - deposit                                                     1,496          1,496
                                                              -----------    -----------

   TOTAL ASSETS                                               $   403,973    $   333,112

                                                              ===========    ===========

LIABILITIES AND STOCKHOLDERS' DEFICIENCY

CURRENT LIABILITIES:
Loan payable to stockholder                                   $    50,000    $    50,000
Loan: Bank line of credit                                          70,804         59,350
Current portion of long-term debt                                  68,846         93,453
Current portion of notes payable to stockholders                   44,275          3,400
Accrued Phelps arbitration award                                  130,060        130,060
Accounts payable and accrued expenses                             205,725        210,529
Accrued compensation payable to stockholders                      113,236         53,411

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

    TOTAL CURRENT LIABILITIES                                     682,946        600,203


Long-term debt, less current portion                                    0         21,160
Notes payable to stockholders,
  less current portion                                            122,625        141,000
Accrued compensation payable to stockholders,
  less current portion                                             27,072         27,072
                                                              -----------    -----------

    TOTAL LIABILITIES                                             832,643        789,435
                                                              -----------    -----------

STOCKHOLDERS' DEFICIENCY:
Preferred stock, par value $.01 per share; 5,000,000 shares
  authorized; 1,500,000 shares issued and outstanding              15,000         15,000
Common stock, par value $.01 per share;
  50,000,000 shares authorized; 15,238,778
  and 15,238,778 shares issued and outstanding                    152,388        152,388
Additional paid-in capital                                      3,206,512      3,157,547
Accumulated deficit                                            (3,802,570)    (3,781,258)
                                                              -----------    -----------

   TOTAL STOCKHOLDERS' DEFICIENCY                                (428,670)      (456,323)
                                                              -----------    -----------

   TOTAL LIABILITIES AND
       STOCKHOLDERS' DEFICIENCY                               $   403,973    $   333,112
                                                              ===========    ===========

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



                                      -3-
<PAGE>

<TABLE>
<CAPTION>

                       CONDENSED STATEMENTS OF OPERATIONS

                THREE AND SIX MONTHS ENDED JUNE 30, 2006 AND 2005
                                   (UNAUDITED)


                                                        THREE MONTHS                   SIX MONTHS
                                                        ENDED JUNE 30,                ENDING JUNE 30,
                                                        --------------                ---------------
                                                    2006            2005            2006           2005
                                                    ----            ----            ----           ----

REVENUE:
<S>                                             <C>            <C>             <C>             <C>
  Systems / software: license fees and sales    $    262,018   $    266,185    $    416,498    $    364,233
  Service Income                                                                      7,500
                                                ------------   ------------    ------------    ------------
          TOTAL REVENUE                              262,018        266,185         423,998         364,233


COST OF REVENUE:                                         950         56,378             950          56,378

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

             GROSS PROFIT                            261,068        209,807         423,048         307,855
                                                ------------   ------------    ------------    ------------

COSTS AND EXPENSES:


Research and development                              96,694        104,366         183,225         183,235

Sales and marketing                                    3,115         32,320           9,490          58,262
General and administrative (includes interest
    expense of $6,372 and $9,920 for the  six
    months ending June 30, 2006 and 2005,
    respectively)                                     91,898        110,763         202,680         209,788

Stock based compensation                              24,483                         48,965
                                                ------------   ------------    ------------    ------------

          TOTAL COSTS AND EXPENSES                   216,190        247,449         444,360         451,285
                                                ------------   ------------    ------------    ------------


NET INCOME (LOSS)                               $     44,878   $    (37,642)   $    (21,312)   $   (143,430)
                                                ============   ============    ============    ============

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


AVERAGE NUMBER OF SHARES USED IN COMPUTATION:
   Basic and diluted                              16,738,778     16,240,976      16,738,778      15,926,623
                                                ============   ============    ============    ============




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



                                      -4-
<PAGE>

<TABLE>
<CAPTION>





           CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIENCY

                         SIX MONTHS ENDED JUNE 30, 2006

                                   (UNAUDITED)

                                    PREFERRED STOCK             COMMON STOCK
                             ---------------------------------------------------       ADDI-                        TOTAL
                                NUMBER                      NUMBER                     TIONAL        ACCUMU-        STOCK-
                                 OF                          OF                       PAID-IN         LATED        HOLDERS'
                               SHARES        AMOUNT         SHARES        AMOUNT       CAPITAL        DEFICIT      DEFICIENCY
                               ------        ------         ------        ------       -------        -------      ----------

<S>                          <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                                                                             48,965                       48,965
Net loss                                                                                               (21,312)       (21,312)
                             ------------------------------------------------------------------------------------------------

Balance, June 30, 2006       1,500,000    $    15,000     15,238,778   $   152,388   $ 3,206,512   $(3,802,570)   $  (428,670)
                             ================================================================================================


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



                                      -5-
<PAGE>

<TABLE>
<CAPTION>

                       CONDENSED STATEMENTS OF CASH FLOWS
                     SIX MONTHS ENDED JUNE 30, 2006 AND 2005

                                   (UNAUDITED)

                                                                            SIX MONTHS
                                                                           ENDED JUNE 30,
                                                                           --------------

                                                                        2006        2005 (1)

OPERATING ACTIVITIES:
<S>                                                                  <C>          <C>
  Net loss                                                           $ (21,312)   $(143,430)
  Adjustments to reconcile net loss to net cash
    provided (used) in operating activities:
       Depreciation and amortization of equipment
         and improvements                                               29,894       26,749
       Stock based compensation                                         48,965
       Changes in operating assets and liabilities:

         Accounts receivable                                          (108,418)    (166,915)
         Prepaid expenses and other current assets                      (2,757)     (10,755)
         Accounts payable and accrued expenses                          (4,804)     105,238
         Accrued compensation payable to stockholders                   59,825
                                                                     ---------    ---------

          NET CASH PROVIDED (USED) IN OPERATING ACTIVITIES               1,393     (189,113)


INVESTING ACTIVITIES - purchase of
  equipment and improvements                                            (2,797)      (6,070)
                                                                     ---------    ---------
FINANCING ACTIVITIES:

    Proceeds from (repayments of) bank line of credit                   11,454       (3,285)
    Proceeds from private placement of common stock                                 155,000
    Proceeds from exercise of options                                               150,000
    Proceeds from loans from stockholders                               22,500      180,000
    Repayments of notes payable and long-term debt                     (45,767)     (42,568)
                                                                     ---------    ---------

             NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES          (11,813)     439,147
                                                                     ---------    ---------


              NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS     (13,217)     243,964

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
                                                                        40,698        4,212
                                                                     ---------    ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD                             $  27,481    $ 248,176
                                                                     =========    =========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
    Interest paid                                                    $   6,372    $   9,920
                                                                     =========    =========

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 June 30, 2006,
     its results of operations for the three and six months ended June 30, 2006
     and 2005, changes in stockholders' deficiency for the six months ended June
     30, 2006 and cash flows for the six months ended June 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 six months ended June 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 1,500,000
     outstanding preferred shares from the date of their issuance in the
     weighted average number of shares outstanding in the computation of basic
     loss per share for the six months ended June 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.

     The Company had a small positive net income for the three months ended June
     30, 2006 and net losses for the six months ended June 30, 2006 and 2005,
     and for the three months ended June 30, 2005. The assumed effects of the
     exercise of vested options to purchase 2,000,000 and 1,575,000 common
     shares at June 30, 2006 and 2005, respectively, and warrants to purchase
     230,000 common shares outstanding at June 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 June 30, 2006, there was $70,804 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 June 30, 2006, the outstanding balances on these loans
     aggregated $68,846. The loans are secured by equipment owned by the Company
     located at two customer sites, and an assignment of a contract with one of
     these customers. In addition, the loans are secured by a personal guarantee
     of the Estate of Dr. David Ryon.

NOTE 5 - NOTES PAYABLE TO STOCKHOLDERS:


     During November and December 2004, Dr. David Ryon, the Company's principal
     stockholder, President, and Chief Executive Officer, until his death in
     December 2004, loaned the Company an aggregate of $105,000. In December
     2004, to memorialize this loan, he executed, as President and Chief
     Executive Officer, on behalf of the Company, a demand promissory note
     payable to himself and bearing interest at 10% per annum. He also executed
     a security agreement, for himself on behalf of the Company, granting to
     himself a security interest in all of the Company's assets not previously
     encumbered as security for full payment under the note. Prior to April 12,
     2005, the Company negotiated with the Estate of Dr. David Ryon a 24-month
     payment schedule, beginning in January 2006. The Company's Board of
     Directors approved the revised terms of the promissory note on April 12,
     2005. In December 2005, the Estate of Dr. Ryon loaned the Company an
     additional $36,000 under an amendment to the December 2004 promissory note
     and the payment schedule was renegotiated to begin in January 2007. In
     March 2006, the Estate of Dr. Ryon loaned the Company an additional $22,500
     under an amendment to the December 2004 promissory note. As of June 30,
     2006, the entire principal amount of $163,500 was outstanding. Principal
     payments of $81,750 are required in both 2007 and 2008.


                                      -8-
<PAGE>


                      IMAGE TECHNOLOGY LABORATORIES, INC.


     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:

     There was no issuance of Common Stock by the Company during the quarter
     ended June 30, 2006.


NOTE 7 - STOCK OPTIONS

     The Company did not grant any options under the Company's option plan
     during the quarter ended June 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 June 30, 2006, the Company expensed
     $24,483 due to stock options. For the quarter ending June 30, 2005, the pro
     forma stock option expense was $461,766, which would have resulted in a pro
     forma net loss of $499,408 (net loss per share of $0.03).

     The following table summarizes information about stock options outstanding
     at June 30, 2006.
<TABLE>
<CAPTION>

                               OPTIONS OUTSTANDING                      OPTIONS EXERCISABLE
                  --------------------------------------------     ----------------------------
                                     WEIGHTED
                      NUMBER           AVERAGE       WEIGHTED         NUMBER          WEIGHTED
     EXERCISE      OUTSTANDING       REMAINING       AVERAGE       OUTSTANDING         AVERAGE
      PRICE        AT JUNE 30,       CONTRACTUAL     EXERCISE      AT JUNE 30,         EXERCISE
      RANGE           2006           LIFE (YEARS)     PRICE           2006              PRICE

<S>               <C>                    <C>        <C>            <C>                <C>
     $ 0.33       1,000,000              3.5        $   0.33       1,000,000          $   0.33
     $ 0.20         550,000              8.6        $   0.20         550,000          $   0.20
     $ 0.22         800,000              8.8        $   0.22         200,000          $   0.22
     $ 0.26         750,000              8.9        $   0.26         250,000          $   0.26

                  ---------          -------        --------       ---------          --------
                  3,100,000              7.1        $   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.



                                      -9-
<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 $27,481 and a working capital
deficiency of $424,629 as of June 30, 2006.



                                      -10-
<PAGE>



                      IMAGE TECHNOLOGY LABORATORIES, INC.



     RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2006
           COMPARED WITH THE THREE AND SIX MONTHS ENDED JUNE 30, 2005


REVENUE:


For the three months ended June 30, 2006, our total revenue was $262,018, a
decrease of $4,167 from the $266,185 in the prior year's comparable period.,For
the six months ended June 30,2006, our total revenue was $423,998, a $59,765
increase from the $364,233 revenue in the prior year's comparable period.




COST OF REVENUE:


For the three and six months ended June 30, 2006, direct cost of revenue for
$950 was incurred. For the three and six months ending June 30,2005, our cost of
revenue was $56,378, a decrease of $55,428 from the prior year's comparable
period, largely attributable to a lack of systems hardware purchases during this
period.



SALES AND MARKETING EXPENSES:


During the three months ended June 30, 2006, we incurred sales and marketing
expenses of $3,115, as compared with sales and marketing expenses of $32,320
during the same period of 2005, a decrease of $29,205. 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 six months ended June 30, 2006 we incurred sales and
marketing expenses of $9,490, as compared with sales and marketing expenses of
$58,262 during the same period of 2005, a decrease of $48,772.



NET LOSS:


We incurred a profit of $44,878 (less than $.01 per share) for the three months
ended June 30, 2006 as compared with a loss of $37,642 (less than $.01 per
share) for the three months ended June 30, 2005, a gain of $82,520. Net loss for
the six months ended June 30, 2006 was $21,312 as compared with a net loss of
$143,430 for the same period in 2005. The Company continues to aggressively
manage costs while it focuses on increasing revenues from sales of systems /
software.



                                      -11-
<PAGE>





                      IMAGE TECHNOLOGY LABORATORIES, INC.


                         LIQUIDITY AND CAPITAL RESOURCES



At June 30, 2006, our total assets were $403,973, an increase of $70,861 from
total assets of $333,112 on December 31, 2005.

As of June 30, 2006, we had cash and cash equivalents and a working capital
deficiency of $27,481 and $424,629, respectively.

Net cash provided in our operating activities for the 6 months ending June 30,
2006 of $1,393 was substantially attributable to our net loss of $21,312 offset
by $59,825 in accrued compensation payable to stockholders. Of the net loss of
$21,312, $48,965 was stock option compensation expense. The net cash used in our
operating activities was financed with $22,500 resulting from an additional loan
from the Estate of Dr. David Ryon and a net of $11,454 from our bank line of
credit. Investing activities (purchase of equipment and improvements) for the
six months ending June 30, 2006 totaled only $2,797.

The foregoing activities, i.e., operating, investing and financing, resulted in
our net cash decrease of $13,217 for the six months ended June 30, 2006.

During September 2002, we obtained a $75,000 working capital loan from a
financial institution. As of June 30, 2006, we have $70,804 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 June 30, 2006, we had $68,846
outstanding under these arrangements. In December 2004, we borrowed $105,000
from our former Chief Executive Officer Dr. David Ryon, which will be repaid
over 24 months, beginning in January 2007. An additional $36,000 and $22,500
were borrowed from the Estate of Dr. Ryon in December 2005 and March 2006,
respectively. Principal payments are $81,750 in 2007 and 2008.


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


In January 2004, 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.

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.


                                      -12-
<PAGE>

                      IMAGE TECHNOLOGY LABORATORIES, INC.

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


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


                 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


In March 2006, the Estate of Dr. Ryon loaned the Company an additional $22,500
under an amendment to the December 2004 promissory note. As of June 30, 2006,
the entire principal amount of $163,500 was outstanding. Principal payments of
$81,750 are required in both 2007 and 2008.


                           FORWARD-LOOKING STATEMENTS

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




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                      IMAGE TECHNOLOGY LABORATORIES, INC.


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.







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<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.



ITEM 2 - CHANGES IN SECURITIES


None.


ITEM 3 - DEFAULTS UPON SENIOR SECURITIES

None.

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

None

ITEM 5 - OTHER INFORMATION



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.


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<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

AUGUST 16, 2006






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