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

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

                                   FORM 10-QSB


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

         For the quarterly period ended      March 31, 2002
                                        ------------------------

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

         For the transition period from                to
                                        ---------------   ----------------


                         Commission File Number: 0-18450

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

                               COLOR IMAGING, INC.
              ----------------------------------------------------
             (Exact name of registrant as specified in its charter)

         DELAWARE                                   13-3453420
  ------------------------------        ----------------------------------
 (State or other jurisdiction of       (I.R.S. Employer Identification No.)
  incorporation or organization)

4350 PEACHTREE INDUSTRIAL BOULEVARD, SUITE 100
NORCROSS, GEORGIA                                         30071
-----------------------------------------------         --------
(Address of principal executive offices)               (Zip code)


                        (770) 840-1090 FAX (770) 242-3494
                        ---------------------------------
              (Registrant's telephone number, including area code)


As of April 30, 2002, there were 10,099,880 shares of Common Stock outstanding.

<PAGE>
                               COLOR IMAGING, INC.
                         QUARTERLY REPORT ON FORM 10-QSB
                  FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2002

                                      INDEX




PART I: FINANCIAL INFORMATION

Item 1. Financial Statements

        Consolidated Condensed Balance Sheets at March 31, 2002
        (Unaudited) and December 31, 2001(Audited).......................3

        Consolidated Condensed Statements of Operations (Unaudited)
        for the Three Months ended March 31, 2002 and 2001...............4

        Consolidated Condensed Statements of Cash Flows (Unaudited)
        for the Three Months ended March 31, 2002 and 2001...............5

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

Item 2. Management's Discussion and Analysis or Plan of Operation .......8

PART II: OTHER INFORMATION

Item 2. Changes in Securities...........................................21

Item 6. Exhibits and Reports on Form 8-K................................21

Signatures..............................................................22










                                       2
<PAGE>

PART I: FINANCIAL INFORMATION
ITEM 1 -FINANCIAL STATEMENTS


                       COLOR IMAGING, INC. AND SUBSIDIARY
                      CONSOLIDATED CONDENSED BALANCE SHEETS

<TABLE>
<CAPTION>
<S>                                                          <C>                 <C>
                         ASSETS                              THREE MONTHS ENDED   YEAR ENDED
                                                                  31-Mar-02        31-Dec-01
                                                                 (Unaudited)       (Audited)
                                                                ------------     ------------
CURRENT ASSETS
    Cash                                                        $    685,386     $    395,327
    Accounts receivable, net                                       3,487,226        3,030,995
    Inventory                                                      5,814,898        6,056,042
    Deferred income taxes                                            244,238          277,239
    Related party portion of IDR bond                                 79,596           79,596
    Other current assets                                             342,264          339,141
                                                                ------------     ------------
          TOTAL CURRENT ASSETS                                    10,653,608       10,178,340
                                                                ------------     ------------

PROPERTY, PLANT AND EQUIPMENT - NET                                8,585,022        8,438,826
                                                                ------------     ------------
OTHER ASSETS
    Patent/intellectual property                                       9,326            5,000
    Deferred income taxes                                            267,000          312,000
    Related party portion of IDR bond                                818,500          818,500
    Other assets                                                     224,654          225,204
                                                                ------------     ------------
          TOTAL OTHER ASSETS                                       1,319,480        1,360,704
                                                                ------------     ------------
                                                                $ 20,558,110     $ 19,977,870
                                                                ============     ============
           LIABILITIES & STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
    Revolving credit lines                                      $  1,431,692     $  1,462,416
    Accounts payable                                               4,909,611        4,898,665
    Current portion of notes payable                                 877,684          369,198
    Current portion of bonds payable                                 335,000          335,000
    Other current liabilities                                        408,129          501,086
                                                                ------------     ------------
           TOTAL CURRENT LIABILITIES                               7,962,116        7,566,365
                                                                ------------     ------------
LONG TERM LIABILITIES
    Notes payable                                                  1,283,899        1,359,000
    Bonds payable                                                  3,445,000        3,445,000
                                                                ------------     ------------
          LONG TERM LIABILITIES                                    4,728,899        4,804,000
                                                                ------------     ------------
           TOTAL LIABILITIES                                      12,691,015       12,370,365
                                                                ------------     ------------
COMMITMENTS & CONTINGENCIES

STOCKHOLDERS' EQUITY
   Common stock, $.01 par value,  authorized  20,000,000
     shares;  10,099,880 and 10,099,175 shares issued and
     outstanding on March 31, 2002 and  December 31, 2001,
     respectively                                                    100,999          100,992
   Additional paid-in capital                                      9,868,283        9,873,939
   Stock subscription receivable                                          --         (149,000)
   Accumulated deficit                                            (2,102,187)      (2,218,426)
                                                                ------------     ------------
          TOTAL STOCKHOLDERS' EQUITY                               7,867,095        7,607,505
                                                                ------------     ------------
                                                                $ 20,558,110     $ 19,977,870
                                                                ============     ============

</TABLE>
                             See Accompanying Notes



                                       3


<PAGE>

                       COLOR IMAGING, INC. AND SUBSIDIARY
                 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                   FOR THE THREE MONTH PERIODS ENDED MARCH 31
                                   (UNAUDITED)



<TABLE>
<CAPTION>
<S>                                                            <C>          <C>
                                                                   2002         2001
                                                               -----------  -----------

           SALES                                               $ 7,859,078  $ 5,528,316
           C0ST OF SALES                                         6,589,293    4,514,325
                                                               -----------  -----------
           GROSS PROFIT                                          1,269,785    1,013,991
                                                               -----------  -----------
           OPERATING EXPENSES:
               Administrative                                      460,966      456,181
               Research & development                              262,364      216,909
               Sales & marketing                                   276,415      225,681
                                                               -----------  -----------
                                                                   999,745      898,771
                                                               -----------  -----------
           OPERATING PROFIT                                        270,040      115,220
                                                               -----------  -----------
           OTHER INCOME (EXPENSE):
               Interest and other income                             6,868        7,831
               Interest & financing expense                       ( 80,663)    (120,574)
               Non-recurring moving expense                             --       (9,719)
                                                               -----------  -----------
                                                                  ( 73,795)    (122,462)
                                                               -----------  -----------

           INCOME (LOSS) BEFORE TAXES                              196,245      ( 7,242)

           PROVISION (BENEFIT) FOR INCOME TAXES                     80,006       (1,900)
                                                               -----------  -----------
           NET INCOME (LOSS)                                    $  116,239   $   (5,342)
                                                               ===========  ===========

           INCOME (LOSS) PER COMMON SHARE
                Basic                                          $       .01  $        --
                Diluted                                        $       .01  $        --

           COMMON SHARES OUTSTANDING
           WEIGHTED AVERAGE SHARES:

                   Basic                                        10,099,567    7,540,551
                                                               ===========  ===========

                   Diluted                                      10,201,615    7,877,911
                                                               ===========  ===========
</TABLE>

                             See Accompanying Notes


                                       4
<PAGE>

                       COLOR IMAGING, INC. AND SUBSIDIARY
                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                   FOR THE THREE MONTH PERIODS ENDED MARCH 31
                                   (UNAUDITED)



<TABLE>
<CAPTION>
<S>                                                     <C>            <C>
                                                             2002           2001
                                                        -----------    -----------

Cash flows from operating activities:
  Net income                                           $    116,239   $     (5,342)
  Adjustments to reconcile net income to net cash
    provided by operating activities:
      Depreciation and amortization                         149,549        152,200
      Deferred income taxes                                  78,001         (2,911)

  Decrease (increase) in:
        Accounts receivable and other receivables          (456,231)       411,718
        Inventories                                         241,144       (431,680)
        Prepaid expenses and other assets                   ( 2,573)      (120,802)
  Increase (decrease) in:
        Accounts payable and accrued liabilities           ( 88,118)       249,162
                                                        -----------    -----------
        Net cash provided by operating activities            38,011        252,345
                                                        -----------    -----------
Cash flows from investing activities:
     Capital expenditures                                  (295,745)      (220,516)
     Other assets                                                --       (102,568)
     Patents and intellectual properties                     (4,326)        (5,000)
                                                        -----------    -----------
        Net cash (used in)
             investing activities                          (300,071)      (328,084)
                                                        -----------    -----------
Cash flows from financing activities:
  Net (payments) under line of credit                      ( 30,724)      (182,000)
  Net proceeds from sale of common stock                    143,351        166,543
  Proceeds from issuance of debt                            500,000             --
  Principal payments of long-term debt                     ( 60,508)      ( 79,643)
                                                        -----------    -----------
         Net cash provided (utilized) by
             financing activities                           552,119        (95,100)
                                                        -----------    -----------
         Net increase (decrease) in cash                    290,059       (170,839)
Cash at beginning of year                                   395,327        339,348
                                                        -----------    -----------
Cash at end of period                                   $   685,386    $   168,509
                                                        ===========    ===========
</TABLE>

                             See Accompanying Notes


                                       5

<PAGE>
                       COLOR IMAGING, INC. AND SUBSIDIARY
          NOTES TO INTERIM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                 March 31, 2002
                                   (Unaudited)

NOTE 1. BASIS OF PRESENTATION

The accompanying  unaudited interim consolidated  condensed financial statements
have been prepared in accordance with accounting  principles  generally accepted
in the United States of America for interim  financial  information and with the
instructions  to  Form  10-QSB.  Accordingly,  they  do not  include  all of the
information and footnotes required by accounting  principles  generally accepted
in the United  States of  America  for  complete  financial  statements.  In the
opinion of management,  all adjustments (consisting of normal recurring accruals
and  adjustments)  considered  necessary  for  a  fair  presentation  have  been
included.  Operating  results for the three  months ended March 31, 2002 are not
necessarily  indicative  of the results  that may be expected for the year ended
December 31, 2002.

NOTE 2. PROPERTY, PLANT AND EQUIPMENT

Property,  plant and equipment are stated at cost. Depreciation of the Company's
property,  plant, and equipment is computed using the straight-line  method. The
estimated useful lives are as follows:

                                                       Years
                                                      --------
       Leasehold improvements                         10 - 20
       Machinery and equipment                         5 - 20
       Furniture and fixtures                          7 - 10

NOTE 3. COMMON STOCK

From January 1, 2002 to March 31,  2002,  one holder of the  Company's  warrants
exercised  1,750  warrants on a cashless  basis and was issued 705 shares of the
Company's common stock. During March 2002, the Company rescinded one transaction
entered  into  during  2001 for the sale of 25,000  shares  of common  stock and
warrants to purchase  25,000  shares of the common  stock of the  Company.  This
transaction  was  retroactively  reflected  in the  financial  statements  as of
December 31, 2001. As of March 2002, all notes  receivable from sales of Company
securities have been fully paid by the investors.

On October 30, 2001, the Company issued and sold 1,000,000  shares of its common
stock to one investor in exchange for $2 million.  The purchase  price was $2.00
per share,  of which $10,000 was payable in cash and  $1,990,000  was payable in
the form of a recourse  promissory  note. The Company also agreed to issue up to
500,000 warrants exercisable at $2.00 per share to purchase the Company's common
stock.  In March 2002,  the Company and the  investor  mutually  rescinded  this
transaction  and the Company has  retroactively  reflected this rescission as of
December 31, 2001.

NOTE 4. INVENTORIES

Inventories  consisted  of the  following  components  as of March 31,  2002 and
December 31, 2001:

                                    March 31, 2002            December 31, 2001
                                 ------------------           -----------------
        Raw materials              $    1,678,500             $       723,480
        Work-in-process                   992,586                     967,982
        Finished goods                  3,269,762                   4,534,410
        Obsolescence allowance           (125,950)                   (169,830)
                                  -----------------           -----------------
            Total                  $    5,814,898             $     6,056,042
                                  =================           =================

                                       6
<PAGE>

NOTE 5. CHANGES TO BORROWING ARRANGEMENTS

The  Company has a $2.5  million  revolving  line of credit with an  outstanding
balance  as of March 31,  2002 of  $1,431,692.  At the end of each month for the
following  month,  the  Company has the  interest  rate option of either the one
month Libor  interest  rate in effect two business  days before the first day of
the month plus 2.50% or the Bank's prime interest rate minus 0.25%.  As of March
31,  2002,  the interest  rate was the one month Libor rate plus 2.50%  (6.87%).
This revolving line of credit has a June 30, 2002 expiration date.

Under the lines of  credit,  the  Company  is  permitted  to borrow up to 85% of
eligible  accounts  receivable and 50 percent of eligible  inventories  (up to a
maximum of $1.1 million and not to exceed 60 percent of the total  outstanding).
The Company has  granted  the Bank a security  interest in all of the  Company's
assets as security for the repayment of the lines of credit.

The Bank agreement  contains  various  covenants that the Company is required to
maintain,  and as of March 31,  2002 the  Company  was in  compliance  with such
covenants.


NOTE 6. SIGNIFICANT CUSTOMERS

In the three month period ended March 31, 2002, two customers  accounted for 47%
and 21%, respectively, of net sales. The Company does not have a written or oral
contract  with these  customers.  All sales are made  through  purchase  orders.
Accounts  receivable from these customers at March 31, 2002, were $1,462,000 and
$711,000, respectively.


NOTE 7. SIGNIFICANT SUPPLIERS

In the three months ended March 31, 2002,  the Company  purchased 49% of its raw
materials, components and supplies from one supplier in connection with sales to
its largest  customers.  At March 31, 2002, the account payable to this supplier
was $2,014,000.

NOTE 8. FINANCIAL REPORTING FOR BUSINESS SEGMENTS:

The  Company  believes  that its  operations  are in a single  industry  segment
involving  the  development  and  manufacture  of  products  used in  electronic
printing.  All of the Company's  assets are domestic.  The sales to unaffiliated
customers by geographic  region for the three month period ended March 31 are as
follows:

                                       2002         2001
                                   -----------  -----------
Sales to Unaffiliated Customers:
United States                      $ 5,180,730  $ 5,019,357
Europe                               1,568,612      288,813
Asia                                   175,555       65,181
All Other                              934,181      154,965
                                   -----------  -----------
Total                              $ 7,859,078  $ 5,528,316
                                   ===========  ===========




                                       7
<PAGE>

ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The following  discussions  should be read in conjunction  with our consolidated
condensed financial statements and the related notes thereto.

GENERAL

     Color Imaging,  Inc.,  (the "Company" or "Color")  OTCBB:  CIMG,  develops,
manufactures  and  markets  products  used in  electronic  printing,  analog and
digital copiers and supply high-speed digital printing systems. These high speed
digital printing systems print in real-time  directly on offset presses.  Offset
presses  are  presses  that  utilize  plates and ink to print on paper and other
materials.  We conduct our business through two separate  operating units, Color
Imaging, Inc. and Logical Imaging Solutions,  Inc. ("Logical").  Color develops,
purchases from others and markets electronic printing products,  including black
text,  color  magnetic ink  character  recognition  and  specialty  toners,  and
provides other parts and  accessories  for laser  printers and digital  copiers.
Logical designs,  manufactures  and integrates  components made by third parties
into a complete  printing  system and offers  technical  support and supplies in
connection  therewith.  Logical's printing system allows commercial  printers to
digitally  process and print data that may change from page to page,  also known
as variable data, and images at very high speeds  directly on commercial  offset
web presses. This capability saves time and money for the printer and customer.

     Our  operating  strategy  is to (1)  expand,  including  through  strategic
acquisition(s), our printer and copier products business, while (2) diversifying
our  business by pursuing  innovative  electron  beam imaging  technologies  and
products  for sale to the  commercial  press  market.  We intend  to expand  our
printer  and  copier  business  by (1)  increasing  the  capacity  of our  toner
manufacturing   facility  and  utilize  it,  increasingly,   for  higher  margin
specialty,  magnetic character  recognition,  copier and color toners and (2) by
expanding  our sources for products  from  strategic  suppliers  that we can add
value to or resell that  complement  our product  lines.  The  objective  of our
pursuit of innovative  technologies  and products  applicable to the  commercial
offset  press  market  is to  become  a  manufacturer  of  our  own  proprietary
high-speed  digital press,  printing in color,  and a related line of consumable
products to add to sales and operating profitability while reducing our reliance
on the printer and copier consumable product markets.

COLOR

     Since  1989,  Color  has  developed  and  manufactured   products  used  in
electronic  printing.  Color  formulates  and produces  black text and specialty
toners,  including  color and  magnetic  ink  character  recognition  toners for
numerous laser  printers.  Color's toners permit the printing of a wide range of
user-selected  colors and also the full process color printing of cyan,  yellow,
magenta and black. Magnetic ink character recognition toners enable the printing
of magnetic  characters  which are required  for the  high-speed  processing  of
checks and other  financial  documents.  Color also  supplies  other  consumable
products used in electronic  printing,  including  toner  cartridges,  cartridge
components, photoreceptors and imaging drums.

     Color  has  continually   expanded  its  product  line  and   manufacturing
capabilities.  This expansion has led to the creation of more than 130 different
black text,  color,  magnetic ink  character  recognition  and  specialty  toner
formulations, including aftermarket toners and imaging products for printers and
facsimile machines manufactured by Brother(TM),  Canon(TM), Delphax(TM), Hewlett
Packard(TM), IBM(TM), Lexmark(TM),  Sharp(TM), Xerox(TM), Minolta(TM), Mita(TM),
Panafax(TM),    Pentax(TM),   Pitney   Bowes(TM),   Epson(TM),   Fuji-Xerox(TM),
Toshiba(TM),  Kyocera(TM),  Okidata(TM),  Panasonic(TM),  and  printing  systems
developed by Logical.  Color also manufacturers and or markets toners for use in
Ricoh,  Sharp(TM),  Xerox(TM) and Cannon(TM) copiers.  Color also offers product
enhancements,  including imaging supplies that enable standard laser printers to


                                       8
<PAGE>

print  magnetic ink character  recognition.  Color markets its branded  products
directly to OEMs and its  aftermarket  products  worldwide to  distributors  and
remanufacturers   of  laser  printer  toner   cartridges   and  to  dealers  and
distributors of copier products.

LOGICAL

     Logical  designs,   assembles  and  markets  a  complete  printing  system,
SOLUTION2000,  to  commercial  printers.  When  installed  directly on an offset
printing press,  the SOLUTION2000  expands printing  capabilities to include the
printing of variable data and images text together including bar codes, magnetic
ink character recognition and unlimited alphanumeric sequencing. These functions
allow  commercial  printers  to  digitally  process and print  variable  data at
extremely high speeds where previously they were able to only print fixed images
from printing plates or cylinders  installed on their offset  printing  presses.
Since its  founding  in 1993,  Logical's  development  efforts  have  focused on
creating a revolutionary  high-speed  digital  variable data printing system for
commercial printing applications that combines software, hardware and consumable
products.  Logical  also offers a full line of  consumable  products,  including
toners,  print  cartridges  and toner  fusing  assemblies.  Our  strategy  is to
continually  build an installed  base of printer  systems  that will  generate a
recurring demand for these consumable products.

     Logical  expects to beta test the  DigitalColorPress,  a Solution series of
printing systems incorporating color printing capabilities in the second quarter
of  2002.  The  DigitalColorPress  can  print  variable  data in  color at rates
exceeding 250  pages-per-minute.  This is in contrast to other products which do
not print  directly on the press and print at speeds of  approximately  85 pages
per minute. We believe that this represents an attractive  alternative for high-
speed offset  printing  applications  because it reduces  steps and labor in the
print  process.  Depending on the result of beta site testing  during the second
quarter of 2002 and determining that reliable  manufacturing  support exists, we
intend to market Logical's  DigitalColorPress  color printing system during 2002
as an enhancement to existing  Solution series  installations  and as an upgrade
for other printing systems.

CRITICAL ACCOUNTING POLICIES

     Our  financial  statements  are  prepared  in  accordance  with  accounting
principles  generally accepted in the United States, which require management to
make estimates and  assumptions  that affect the reported  amounts of assets and
liabilities  at  the  date  of  the  financial  statements,  the  disclosure  of
contingent  assets and  liabilities,  and the  reported  amounts of revenues and
expenses  during the reporting  period.  Actual  results could differ from those
estimates. We believe the following critical accounting policies affect our more
significant  estimates and assumptions  used in the preparation of our financial
statements.  Our  significant  estimates  and  assumptions  are reviewed and any
required adjustments are recorded on a quarterly basis.

     Carrying  Value of Electron  Beam Imaging Test  Equipment.  As of March 31,
2002  the net  book  value of our  investment  in  electron  beam  imaging  test
equipment was approximately  $1.4 million.  We have estimated the useful life of
this  equipment to be ten years.  The equipment is new technology and is used by
us to support our selling, manufacturing and research and development activities
in connection with Logical's  DigitalColorPress.  To date,  however, we have not
fully commercialized such products,  and the future benefit that we would derive
from this  equipment is dependent  upon our  successfully  commercializing  this
technology  and our products  remaining  competitive  for at least the length of
time we have  estimated  its useful life.  Should we not be  successful in fully
commercializing  the  related   DigitalColorPress   products  or  realizing  the
sufficient  levels of sales  from  such  products,  these  assets  could  become
partially or fully impaired.


                                       9
<PAGE>

     Lower of Cost or Market for Inventory.  Our inventories are recorded at the
lower of  standard  cost or  market.  As with any  manufacturer  or  wholesaler,
economic conditions,  cyclical customer demand, product introductions or pricing
changes of our competitors and changes in purchasing or distribution  can affect
the carrying value of inventory.  As circumstances  warrant,  we record lower of
cost or market inventory  adjustments.  In some instances these  adjustments can
have a material effect on the financial  results of an annual or interim period.
In order to determine such  adjustments,  we evaluate the age,  inventory turns,
estimated fair value and, in the case of toner  products,  whether or not it can
be reformulated and manufactured into other products,  and record any adjustment
if estimated fair value is below cost.  Through  periodic  review of each of our
inventory  categories and by offering markdown or closeout pricing, we regularly
take steps to sell off slower moving inventory to eliminate or lessen the effect
of any lower of cost or market adjustment.

     Carrying  Value  of  Toner  Manufacturing  Equipment.  We are  nearing  the
completion of the latest expansion of our toner manufacturing  facility. We have
some $7.5 million  invested in certain of the equipment and  leaseholds,  with a
carrying value of $6 million,  in connection with toner  manufacturing that have
estimated lives of up to twenty years. Should competing technologies or offshore
competitors  cause  our  manufacturing  technology  to be  non-competitive,  the
estimated life of these assets may need to be shortened and their carrying value
could be materially affected.

OVERVIEW

     Net  sales,  for the  three  months  that  ended on March  31,  2002,  were
primarily  generated from the sale of Color's black text, color and magnetic ink
character recognition printer and copier toners and related consumable products,
including  toner  cartridges  and the  re-filling of certain  toner  cartridges.
Revenue is  recognized  from the sale of products  when the goods are shipped to
the  customer.  In the three months ended March 31, 2002,  two  distributors  of
imaging supplies accounted for approximately 47% and 21%,  respectively,  of net
sales. Sales to these customers consist primarily of analog copier products, and
as a result are expected to decline over time unless  these  declining  sales to
these  customers are offset by the sale of digital  copier  products.  We do not
have a written or oral contract with these customers. All sales are made through
purchase orders.  Consistent with the purchase orders and forecasts  provided to
us by our two major  customers that account for 68% of our business,  we provide
our  major  suppliers  with  purchase  orders  three  months in  advance  and an
additional rolling forecast for two months. We communicate regularly and meet at
least twice annually with these  customers and suppliers to assess  developments
in the industry  and  expected  changes in the business to maintain an efficient
supply chain.  Net sales made outside of the United  States  increased to 34% of
total sales for the three months  ended March 31,  2002,  compared to 9% for the
comparable  period last year.  This  increase in  international  sales  resulted
primarily from the increase in sales to our two largest customers.

     Logical's  sales for printing  systems and related  software and consumable
products  for the three  months  that ended on March 31,  2002  represented  2.5
percent of our net revenues.

RECENT DEVELOPMENTS

     We have  commenced the relocation  and  consolidation  of most of Logical's
operations and research and development  activities from Santa Ana,  California,
to our headquarters in Norcross, GA, leaving certain field support activities in
California.  This move to our  headquarters  is intended  to achieve  additional
efficiencies,  and we expect to complete the relocation and consolidation by the
end of the second quarter of 2002.

     During March 2002, we rescinded two transactions for the sale of our common
stock and warrants to purchase  additional  shares of our common stock  totaling
1,025,000 and 525,000,  respectively.  The purchasers paid the par value in cash
for the shares issued to them, and the balance of the purchase  price  consisted


                                       10
<PAGE>

of recourse  promissory  notes. The sale of 1,000,000 shares of our common stock
and warrants to purchase an additional  500,000  shares of common stock was, per
agreement,  subject to our registering the securities for resale.  However,  the
SEC Staff took the position that these  securities  could not be registered  for
resale in our pending Form SB-2  registration  statement and the transaction was
rescinded,  the  shares,  warrant  and  promissory  note were  cancelled  and we
retained the $10,000 and accrued interest earned thereon in consideration of our
expenses incurred in connection with the transaction. The second transaction for
25,000 shares of our common stock and warrants to purchase an additional  25,000
shares  of our  common  stock  was  rescinded  when  the  parties  believed  the
promissory  note  would  not be paid by the  time  our  Form  SB-2  registration
statement  became  effective.  The  shares,  warrant  and  promissory  note were
cancelled and the cash consideration was refunded the purchaser.

     With the  rescission  of the two  abovementioned  sales of our common stock
totaling  $2,050,000,  we anticipate that we will need to raise additional funds
from other  sources to meet  operating  requirements  and to fund other  planned
activities.  We intend to meet our  operating  requirements  by  borrowing  from
affiliates. Certain other planned activities are dependent upon either increased
borrowings  from our  affiliates,  borrowings  from others or our raising  funds
through the sale of our securities.

     On March 18, 2002,  the Board of Directors  authorized  our filing with the
Securities  and Exchange  Commission an amendment to our Form SB-2  registration
statement to include a continuous offering of up to 3,500,000 Units at $2.00 per
Unit (each unit consists of one share of common stock,  par value $.01,  and one
warrant to purchase  one share of common  stock at an exercise  price of $2.00),
subject to periodic  review and re-pricing by management.  We filed an amendment
to the SB-2 with the Securities and Exchange Commission on April 11, 2002.

     The Board of  Directors  has  proposed  a  resolution  to the  stockholders
amending our Restated  Certificate of Incorporation to increase the total number
of shares of common stock which we have  authority to issue from twenty  million
(20,000,000) shares to thirty million (30,000,000) shares, par value of $.01 per
share.

     As of April 30, 2002, of the 20,000,000 shares of common stock which we are
authorized to issue,  10,099,880  were issued and  outstanding,  an aggregate of
1,210,000   shares  are  reserved  for  issuance  in  connection   with  options
exercisable  into shares of common  stock,  1,131,312  shares are  reserved  for
issuance in connection with warrants exercisable into shares of common stock and
7,000,000  shares are reserved for issuance in connection with the  registration
of shares of common stock and warrants  exercisable  into shares of common stock
pursuant to a Registration Statement on Form SB-2, as amended,  originally filed
December 28, 2001 and last amended  April 11,  2002.  Accordingly,  only 558,808
shares  remain  authorized  but  unissued.  No  shares  of  Preferred  Stock are
currently outstanding.

     The board believes that the amendment to our authorized number of shares is
necessary to ensure that we will have  sufficient  shares  available to meet our
ongoing business needs and to take advantage of future corporate  opportunities.
In addition,  the board of directors  believes that the proposed increase in the
authorized  shares of  common  stock is in the best  interests  of Color and its
stockholders  and believes  that it is advisable  to authorize  such  additional
shares and have them available in connection with possible future  transactions,
such  as  financings,  strategic  alliances,  corporate  mergers,  acquisitions,
possible  funding  of new  product  programs  or  businesses  and other uses not
presently  determinable  and as may be  deemed  to be  feasible  and in our best
interest.  There are no present  plans to issue any of the  proposed  additional
authorized shares of common stock.  Further stockholder  authorization would not
be necessary  prior to any such issuance,  except for certain  situations  where
stockholder  approval may be required  under Nasdaq or other  exchange  rules or
Delaware law.

                                       11
<PAGE>

RESULTS OF OPERATIONS

The following  table sets forth certain  information  derived from the Company's
unaudited interim consolidated statements of operations:

                                                    THREE MONTHS ENDED
                                                         MARCH 31
                                                  2002               2001
                                                 (PERCENTAGE OF NET SALES)

           Net sales . . . . . . . . . . .        100                100
           Cost of sales . . . . . . . . .         84                 82
           Gross profit  . . . . . . . . .         16                 18
           Administrative expenses . . . .         6                   8
           Research and development  . . .         3                   4
           Sales and marketing . . . . . .         4                   4
           Operating income (loss) . . . .         3                   2
           Interest expense  . . . . . . .         1                   2
           Depreciation and amortization .         2                   3
           Income before taxes . . . . . .         2                   0
           Provision for taxes . . . . . .         1                   0

           Net income  . . . . . . . . . .         1                   0


THREE MONTHS ENDED MARCH 31, 2002 COMPARED TO THREE MONTHS ENDED MARCH 31, 2001

NET SALES.  Our net sales were $7.9 million for the three months ended March 31,
2002,  or an increase of 44% compared to $5.5 million for the three months ended
March 31, 2001. Of the $7.9 million in net sales, $5.1 million were attributable
to copier products of Color.  The revenue  increase from copier products to $5.1
million  from 2002 to 2001 was $1.9  million,  or 59%. We believe  that sales of
laser  printing  products  will  increase  in future  periods as a result of our
factory  expansion  to be completed  in the second  quarter of 2002.  We further
believe that  completion of these tasks,  with the resulting  added capacity and
increased   production,    will   increase   manufacturing    efficiencies   and
competitiveness  and reduce cost of sales.  Net sales made outside of the United
States  increased  to 34% of total  sales for the three  months  ended March 31,
2002,  compared  to 9% for the  comparable  period last year.  This  increase in
international  sales  resulted  primarily  from the increase in sales to our two
largest customers.

COST OF GOODS SOLD.  Cost of goods sold increased by $2.1 million or 47% to $6.6
million in the three months ended March 31, 2002 from $4.5 million for the three
months ended March 31, 2001.  This  increase was  primarily due to increased net
sales. Cost of goods sold as a percentage of net sales increased by 2 percentage
points from 82% for the three  months  ended March 31, 2001 to 84% for the three
months ended March 31, 2002.  This  increase  reflected  the increase in certain
copier product sales at lower margins.

GROSS PROFIT.  As a result of the above factors,  gross profit increased to $1.3
million in the three  months ended March 31, 2002 from $1.0 million in the three
months ended March 31, 2001. Gross profit as a percentage of net sales, however,
decreased  by 2  percentage  points from 18% to 16% for the three  months  ended
March 31,  2002,  as  compared  to the  corresponding  period of the prior year.
During 2002, with the completion of the factory expansion,  management  believes
that both the gross profit dollars and percentage will improve over 2001.

OPERATING EXPENSES.  Operating expenses increased $101,000 or 11% to $999,700 in
the three  months  ended March 31, 2002 from  $898,800 in the three months ended
March 31, 2001. General and administrative,  selling and R&D expenses decreased,
as a  percentage  of net sales,  to 13% in the three months ended March 31, 2002
from 16% in the three months ended March 31,  2001.  General and  administrative
expenses  were  approximately  the same at $460,000  for the three  months ended


                                       12
<PAGE>

March 31, 2002 and 2001. Selling expenses  increased by $50,700,  or 22%, in the
three months  ended March 31, 2002  compared to the three months ended March 31,
2001.  Selling  expenses  increased  primarily  as the  result of the  increased
marketing  costs  associated with the increased  revenues from copier  products.
Research and development  expenses increased by $45,500,  or 21%, to $262,400 in
the three months ended March 31, 2002.  Research and  development  expenses as a
percentage of net sales decreased to 3% in the three months March 31, 2002, from
4% in the three months ended March 31, 2001, reflecting the higher sales level.

OPERATING INCOME.  As a result of the above factors,  operating income increased
by  $154,800,  to a profit of $270,000 in the three  months ended March 31, 2002
from $115,200 in the three months ended March 31, 2001.

INTEREST AND FINANCE EXPENSE. Interest expense decreased by $39,900 in the three
months  ended March 31, 2002 from the three  months  ended March 31,  2001.  The
decrease was primarily the result of lower  interest rates and  secondarily  the
result of reduced interest bearing debt levels.

OTHER INCOME.  Other income  decreased by $1,000 from income of $8,000 to income
of $7,000 in the three  months  ended March 31, 2002 from the three months ended
March 31, 2001.

INCOME TAXES. As the result of our increased profit in the current year,  income
tax  provisions  were $80,000 for the three months ended March 31, 2002 compared
to a tax credit of $2,000 for the three months ended March 31, 2001.

LIQUIDITY AND CAPITAL RESOURCES

At March 31, 2002, our working  capital was  approximately  $2.7 million and our
current  ratio  was 1.34 to 1. At the year  ended  December  31,  2001,  working
capital was approximately $2.6 million and our current ratio was 1.35 to 1.

Cash flows  provided by  operating  activities  were $38,000 in the three months
ended March 31, 2002  compared to $252,000 in the three  months  ended March 31,
2001. The cash flows provided by operating  activities in the three months ended
March 31, 2002  decreased  primarily  from  carrying  higher  levels of accounts
receivable and our reducing payables and accrued  liabilities during 2002. While
accounts and other receivables  increased by $456,000,  reflecting our growth in
net sales,  in the three months ended March 31, 2002,  this use of cash flow was
partially offset by a reduction of inventory for the same period of $241,000. We
have  improved  our  inventory  turnover  beyond that which is  reflected in the
inventory  balances.  As the result of changing to  purchasing  from our largest
vendor at terms of freight on board at  origination,  we have some  $700,000  of
inventory  in transit at March 31,  2002.  While,  on the other hand,  we had no
inventory  in transit at March 31,  2001.  Had we not  changed  the terms of our
purchasing from our largest  vendor,  our inventory at March 31, 2002 would have
been approximately $5.1 million compared to $6.1 million at March 31, 2001, or a
reduction to inventory of $1 million, or 16%, while net sales increased 44%.

Cash flows used in investing  activities were $300,000 in the three months ended
March 31,  2002,  compared to $328,000 in the three months ended March 31, 2001.
Included in cash flows used in  investing  activities  in the three months ended
March 31, 2002,  was $296,000 in capital  expenditures  in  connection  with the
completion of our factory expansion.

We have a $2.5  million  revolving  line of  credit  with our  bank  that has an
outstanding  balance  as of March  31,  2002 of  $1,432,000.  At the end of each
month,  for the following  month,  we have an interest rate option of either the
one-month  Libor  interest rate in effect two business days before the first day
of the month plus 2.50% or our bank's prime  interest  rate minus  0.25%.  As of
March 31, 2002,  the interest  rate was the  one-month  Libor rate of 2.25% plus
2.50%  (6.87%).  This  revolving  line of credit has a June 30, 2002  expiration
date,  and we expect to renew this  revolving  line of credit for an  additional
year on or about June 30, 2002.

                                       13
<PAGE>

Under the line of  credit,  we are  permitted  to  borrow up to 85% of  eligible
accounts  receivable and 50 percent of eligible  inventories (up to a maximum of
$1.1  million  and not to exceed 60 percent of the total  outstanding).  We have
granted our bank a security  interest  in all of our assets as security  for the
repayment of the lines of credit.

The Bank agreement  contains various  covenants which the Company is required to
maintain.  As of March  31,  2002,  the  Company  was in  compliance  with  such
covenants.

Cash flows provided by financing activities for the three months ended March 31,
2002 was $552,000,  resulting  primarily from the $500,000 loan we received from
an officer.  Had we not  received  the loan,  cash flows  provided by  financing
activities  at March 31,  2002 would have been  $52,000  compared  to cash flows
utilized in financing activities of $95,000 for the three months ended March 31,
2001.

Funds  generated  from  operating   activities  and  availability  under  credit
facilities  is  expected  to be  insufficient  to  finance  our  plans to expand
operating   activities  for  the  remainder  of  2002.   Having   rescinded  two
transactions  during  March  2002  for  the  sale  of  our  securities  totaling
$2,050,000, we anticipate that we will need to raise an additional $500,000 from
other sources to fund these activities.  To meet these requirements we intend to
seek financing from our affiliates and/or engage in sales of our securities.  We
have received our bank's  consent to borrow up to $1.4 million from  affiliates.
We  borrowed  $500,000  during  the first  quarter  2002 from an officer to meet
vendor  commitments for products.  We intend to repay this borrowing from future
sales of our common stock. Notwithstanding our success in obtaining financing in
the amount of $500,000,  funds on hand will be  insufficient to meet our planned
need for an additional $500,000, consisting of $500,000 to vendors for products.
Should we not obtain these  additional  funds,  certain  operational  activities
would have to be reduced or curtailed entirely to meet our existing  commitments
and a $250,000 principal payment due on our industrial  development bond on July
1, 2002.  We intend to fund these  planned  activities  by either  borrowing the
additional  funds from  affiliates  or selling our  securities.  There can be no
assurance that additional financing will be available on favorable terms or that
the  proceeds  from the sale of our  securities  will be available to meet these
planned operating and financing activities.  We believe that these operating and
investing  activities,  if successfully  completed,  will increase  revenues and
operating margins.

FACTORS   THAT  MAY   AFFECT   FUTURE   RESULTS   AND   INFORMATION   CONCERNING
FORWARD-LOOKING STATEMENTS

Statements  contained in this report which are not statements of historical fact
are  forward-looking  statements  within  the  meaning  of  Section  27A  of the
Securities Act of 1933 and Section 21E of the  Securities  Exchange Act of 1934.
These forward-looking statements may be identified by the use of forward-looking
terms such as "believes," "expects," "may", "will," "should" or "anticipates" or
by  discussions of strategy that involve risks and  uncertainties.  From time to
time, we have made or may make forward-looking statements, orally or in writing.
These  forward-looking  statements include  statements  regarding our ability to
borrow funds from financial institutions or affiliates and/or engage in sales of
our securities,  our intention to repay certain  borrowings from future sales of
our securities,  the ability to expand capacity by placing in service additional
manufacturing  equipment  during the  second  quarter  of 2002,  the  ability to
commercialize our electron beam imaging technologies and products,  our expected
acquisition  of business or  technologies,  our  expectation  that  shipments to
international  customers will continue to account for a material  portion of net
sales,  anticipated  future revenues,  sales,  operations,  demand,  technology,
products,  business  ventures,  major customers,  major suppliers,  competition,
capital  expenditures,  credit  arrangements,  and  other  statements  regarding
matters that are not historical facts,  involve predictions which are based upon
a number of future  conditions that  ultimately may prove to be inaccurate.  Our
actual  results,  performance or achievements  could differ  materially from the
results  expressed  in,  or  implied  by,  these   forward-looking   statements.
Forward-looking statements are made based upon management's current expectations
and beliefs concerning future  developments and their potential effects upon our


                                       14
<PAGE>

business.  We cannot predict  whether future  developments  affecting us will be
those  anticipated by  management,  and there are a number of factors that could
adversely  affect our future  operating  results or cause our actual  results to
differ  materially  from  the  estimates  or  expectations   reflected  in  such
forward-looking statements, including without limitation, those discussed in the
sections titled "The Company" and "Management's Discussion and Analysis" and the
factors set forth below:

Risks related to our business:

We anticipate that we will need to raise additional capital or obtain funding to
finance certain of our planned operating activities over the next twelve months.

Our failure to raise  additional  capital in the approximate  amount of $500,000
may  significantly  limit our  ability  to  finance  certain  planned  operating
activities over the next twelve months that we believe will generate  additional
revenues and reduce manufacturing costs. Specifically, we will need to borrow or
raise  additional  funds to meet  the  additional  planned  $500,000  of  vendor
commitments for product.  We may not be able to obtain  additional  financing at
commercially reasonable rates, or at all. Our failure to obtain additional funds
would  significantly  limit or  eliminate  our ability to conduct the  foregoing
activities  or we  may  have  to  curtail  or  eliminate  other  activities.  We
anticipate  that we will seek  additional  funding through the public or private
sales of our securities. That could include financing through equity securities,
or through commercial or private financing arrangements.  Adequate funds may not
be available  when needed or on terms  acceptable to us, or at all. In the event
that we are not able to obtain  additional  funding on a timely basis, we may be
required  to  limit  any  proposed  operations,   research  and  development  or
expansion.

The success of approximately  40% of our business depends on a supplier approved
by one of our customers for that business.

Some  of  our  products  incorporate  technologies  that  are  available  from a
particular   supplier  that  has  been   approved  by  one  of  our   customers.
Approximately  40% of our sales for the three  months  ended March 31, 2002 were
derived from products limited to a specific supplier. For the three months ended
March 31, 2002, we purchased 49% of our raw  materials,  components and supplies
from the same  supplier.  We do not have a  written  agreement  with this or any
other  supplier.  We rely on  purchase  orders to provide  us with the  supplies
needed.  Should  we be  unable  to  obtain  the  necessary  materials  from this
supplier, product shipments could be prevented or delayed, which could result in
a loss of sales.  If we are  unable to  fulfill  existing  orders or accept  new
orders because of a shortage of materials,  we may lose revenues and risk losing
customers.

The success of our business depends on a limited number of customers.

In  the  three  months  ended  March  31,  2002,  two  customers  accounted  for
approximately  68%  of our  net  sales.  We do not  have  contracts  with  these
customers and all of the sales to them are made through purchase  orders.  While
our products typically go through the customer's required qualification process,
which we  believe  gives us an  advantage  over other  suppliers,  this does not
guarantee  that the customer  will continue to purchase from us. The loss of any
of  these  customers,   including  through  an  acquisition  or  other  business
combination could have a substantial and adverse effect on our business. We have
in the past, and may in the future,  lose one or more major customers.  If we do
not sell products or services to customers in the quantities anticipated,  or if
a major customer  terminates its relationship  with us market  perception of our
products and technology,  growth prospects,  and financial condition and results
of operation could be harmed.

Our success is dependent on our ability to successfully develop, or acquire from
third  parties  products  that we can  commercialize  and  that  achieve  market
acceptance.

                                       15
<PAGE>

The challenges we face in implementing  our business model include  establishing
market acceptance of existing products and services and successfully  developing
or  acquiring  new  product  lines  that  achieve  market  acceptance.  We  must
successfully  commercialize the products that are currently being developed, and
continue to acquire from third parties  parts,  materials  and finished  product
that can be integrated into finished products or sold as our products.  While we
have  successfully  developed  toners in the past and are in the late  stages of
developing   and   testing   several  new  toners  and   installing   our  first
DigitalColorPress  employing  electron  beam imaging  technologies,  we have not
commercialized   many  of  the  toners  that  are  under  development  or  fully
commercialized  for  manufacturing the  DigitalColorPress.  While we have in the
past  acquired  from third  parties  materials  and  products  that we have been
successful  in  selling,  there can be no  assurance  that parts,  materials  or
products for new products will be available or will achieve  market  acceptance.
If we fail to  successfully  commercialize  products we develop or acquire  from
third  parties,  or if these  products fail to achieve  market  acceptance,  our
financial condition and results of operation would be seriously harmed.

Our  success is  dependent  on our  ability to utilize  available  manufacturing
capacity.

We recently expanded our  manufacturing  capacity by acquiring new manufacturing
equipment  and  moving to a larger  location.  We intend to  continue  to expand
capacity by placing in service  additional  manufacturing  equipment  during the
second quarter of 2002. To fully utilize these new additions to the factory, new
formulations for toner have to be developed specifically for manufacture on this
new  equipment  or orders for  larger  quantities  of  existing  toners  must be
obtained. While we have been successful in developing formulas for new equipment
in the past and  increasing  sales of many of our existing toner  products,  our
continued  success  will be  dependent  on our  ability  to  develop  additional
formulations  or increase our sales from existing  formulations  and manufacture
the toners with the new equipment to achieve a reduction in production costs. We
cannot  assure  you  that  we  will  be  successful  in  developing  all  of the
formulations  needed in the future or that we will be able to manufacture  toner
at a lower production cost on a regular basis or that such products will achieve
market  acceptance.  If we are not  successful,  or if our  historical  business
declines  as the  result of our  efforts  in this  area,  our  business  will be
materially and adversely affected.

We  intend to grow  revenues  through  an  acquisition  strategy  that may prove
unsuccessful.

We intend to pursue  acquisitions of businesses or technologies  that management
believes  complement or expand the existing business.  Acquisitions of this type
involve a number of risks,  including the possibility that the operations of any
business that are acquired will be  unprofitable  or that  management  attention
will be diverted  from the  day-to-day  operation of the existing  business.  An
unsuccessful  acquisition  could reduce  profit  margins or  otherwise  harm our
financial   condition,   by,  for  example,   impairing  liquidity  and  causing
non-compliance with lending institution's  financial covenants. In addition, any
acquisition  could  result in a  dilutive  issuance  of equity  securities,  the
incurrence  of  debt or the  loss  of key  employees.  Certain  benefits  of any
acquisition may depend on the taking of one-time or recurring accounting charges
that may be material. We cannot predict whether any acquisition undertaken by us
will be successfully  completed or, if one or more  acquisitions  are completed,
whether the  acquired  assets  will  generate  sufficient  revenue to offset the
associated costs or other adverse effects.

Our success depends on our ability to develop or acquire  intellectual  property
rights.

Our success depends in part on our ability to develop proprietary toner formulas
and manufacturing processes, obtain patents, copyrights and trademarks, maintain
trade secret protection and operate without infringing the proprietary rights of


                                       16
<PAGE>

others.  Current or future claims of intellectual  property  infringement  could
prevent us from  obtaining  technology of others and could  otherwise  adversely
affect our operating results,  cash flows,  financial  position or business,  as
could expenses incurred enforcing intellectual property rights against others or
defending  against claims that our products  infringe the intellectual  property
rights of others.

Our intellectual property protection is limited.

While we have one patent and we have  received the Notice of Allowance  from the
U.S. Patent and Trademark Office for another patent, on the whole we do not rely
on patents to protect our  proprietary  rights.  We do rely on a combination  of
laws such as trade secrets and contractual  restrictions such as confidentiality
agreements to protect proprietary rights. Despite any precautions we have taken:

..    laws and  contractual  restrictions  might  not be  sufficient  to  prevent
     misappropriation  of our technology or deter others from developing similar
     technologies; and

..    policing  unauthorized  use of our  products is  difficult,  expensive  and
     time-consuming  and we might not be able to  determine  the  extent of this
     unauthorized use.

Therefore, there can be no assurance that we can meaningfully protect our rights
in such unpatented  proprietary technology or that others will not independently
develop substantially  equivalent proprietary products or processes or otherwise
gain access to the proprietary  technology.  Reverse  engineering,  unauthorized
copying or other  misappropriation  of our proprietary  technology  could enable
third  parties to benefit  from our  technology  without  paying us which  could
significantly harm our business.

Acts of domestic terrorism and war have impacted general economic conditions and
may impact the industry and our ability to operate profitably.

On  September  11,  2001,  acts of  terrorism  occurred  in New  York  City  and
Washington, D.C. On October 7, 2001, the United States launched military attacks
on  Afghanistan.  As a result of those terrorist acts and acts of war, there has
been a disruption in general economic activity. The demand for printing products
and services may decline as layoffs in the  transportation  and other industries
affect the economy as a whole.  There may be other  consequences  resulting from
those acts of terrorism,  including  civil  disturbance,  war, riot,  epidemics,
public  demonstration,   explosion,   freight  embargos,   governmental  action,
governmental   delay,   restraint   or   inaction,    quarantine   restrictions,
unavailability  of capital,  equipment,  personnel,  which we may not be able to
anticipate. These terrorist acts and acts of war may continue to cause a slowing
of the  economy,  and in turn,  reduce  the  demand  of  printing  products  and
services,  which  would  harm our  ability  to make a profit.  We are  unable to
determine the long-term impact, if any, of these incidents or of any acts of war
or terrorism in the United States or worldwide on the U.S. economy,  on us or on
the price of our common stock.

We depend on the efforts and  abilities  of certain  officers  and  directors to
continue our operations and generate revenues.

Our success depends to a significant  extent on the continued services of senior
management and other key personnel.  While we do have  employment,  non- compete
and  confidentiality  agreements  with executive  officers and certain other key
individuals,  these agreements may be terminated by either party upon giving the
required  notice.  The loss of the services of any of our executive  officers or
other key  employees  could harm our  business.  Our success also depends on our
ability to attract,  retain and motivate highly skilled  employees.  Competition
for qualified  employees in the industries in which we operate is intense. If we
fail to hire and retain a sufficient number of qualified employees, our business
will be adversely affected.

                                       17
<PAGE>

Compliance  with  government  regulations  may  cause  us  to  incur  unforeseen
expenses.

Our black text,  color and magnetic  character toner supplies and  manufacturing
operations  are  subject to domestic  and  international  laws and  regulations,
particularly  relating to environmental  matters that impose  limitations on the
discharge of pollutants into the air, water and soil and establish standards for
treatment,  storage and disposal of solid and hazardous wastes. In addition,  we
are subject to regulations  for storm water  discharge,  and as a requirement of
the State of Georgia have  developed  and  implemented  a Storm Water  Pollution
Prevention  Plan.  We are also  required to have a permit issued by the State of
Georgia in order to conduct  various  aspects of our business.  Compliance  with
these laws and regulations has not in the past had a material  adverse affect on
our capital  expenditures,  earnings or  competitive  position.  There can be no
assurance, however, that future changes in environmental laws or regulations, or
in the criteria required to obtain or maintain necessary permits,  will not have
a material adverse affect on our operations.

We sell a significant portion of our products internationally,  which exposes us
to currency fluctuations and collection and product recall risks.

We sell a  significant  amount of  product  to  customers  outside of the United
States.  International  sales accounted for 34% of net sales in the three months
ended March 31, 2002 and 9% in the three months ended March 31, 2001.  We expect
that  shipments  to  international  customers  will  continue  to account  for a
material  portion of net sales.  Most products are priced in U.S.  dollars,  but
because we do sell products in Europe denominated in Euros,  fluctuations in the
Euro could also  cause our  products  there to become  less  affordable  or less
competitive  or we may  sell  some  products  at a loss  to  otherwise  maintain
profitable business from a customer.  Most of our products sold  internationally
are on open  account,  giving rise to the added costs of collection in the event
of non-payment.  Further,  should a product shipped  overseas be defective,  the
Company would  experience  higher costs in connection  with a product  recall or
return and replacement.  We cannot assure you that these factors will not have a
material  adverse effect on our  international  sales and would,  as the result,
adversely impact our results of operation and financial condition.

Our quarterly operating results fluctuate as a result of many factors.

Our quarterly operating results fluctuate due to various factors.  Some of these
factors  include the mix of products sold during the quarter,  the  availability
and costs of raw materials or components,  the costs and benefits of new product
introductions, and customer order and shipment timing. Because of these factors,
our quarterly  operating results are difficult to predict and are likely to vary
in the future.

Risks relating to our industry:

We operate in a competitive and rapidly changing marketplace.

There is significant  competition in the toner,  consumable imaging products and
color printing systems industries in which we operate.  In addition,  the market
for digital  color  printers  and copiers  and  related  consumable  products is
subject to rapid  change.  Many  competitors,  both OEMs and other after  market
firms,  have longer operating  histories,  larger customer bases,  greater brand
recognition and significantly  greater financial,  marketing and other resources
than we do. These competitors may be able to devote substantially more resources
to developing  their business than we can. Our ability to compete depends upon a
number of factors,  including  the success and timing of product  introductions,
marketing and distribution capabilities and the quality of our customer support.
Some of these factors are beyond our control. In addition,  competitive pressure
to develop new products and technologies  could cause our operating  expenses to
increase substantially.


                                       18
<PAGE>

Our  products  have  short  life  cycles  and  are  subject  to  frequent  price
reductions.

The  markets  in  which  we  operate  are   characterized  by  rapidly  evolving
technologies,   frequent  new  product   introductions   and  significant  price
competition.  Consequently,  our products  have short life  cycles,  and we must
frequently  reduce  prices in response  to product  competition.  Our  financial
condition and results of operations could be adversely affected if we are unable
to manufacture  new and  competitive  products in a timely  manner.  Our success
depends on our  ability  to develop  and  manufacture  technologically  advanced
products,  price them  competitively,  and achieve cost  reductions for existing
products.  Technological  advances  require  sustained  research and development
efforts, which may be costly.

Our  financial  performance  depends  on  our  ability  to  successfully  manage
inventory levels, which is affected by factors that may be beyond our control.

Our  financial  performance  depends in part on our ability to manage  inventory
levels to  support  the needs of new and  existing  customers.  Our  ability  to
maintain appropriate  inventory levels depends on factors that may be beyond our
control,  including unforeseen increases or decreases in demand for our products
and production and supply difficulties.  Demand for our products can be affected
by product  introductions  or price  changes by  competitors  or by us, the life
cycle of our products,  or delays in the  development  or  manufacturing  of our
products.  Our operating results and ability to increase the market share of our
products may be adversely  affected if we are unable to address inventory issues
on a timely basis. In addition, competitive pressure to develop new products and
technologies could cause our operating expenses to increase substantially.

Risks relating to owning our common stock:

Our officers,  directors and principal stockholders own approximately 50% of the
outstanding  shares of common  stock,  allowing  these  stockholders  to control
matters requiring approval of the stockholders.

As a result of such  ownership as of March 31, 2002 by our  officers,  directors
and principal  stockholders,  investors  will have limited  control over matters
requiring  approval by the  stockholders,  including  the election of directors.
Such  concentrated  control may also make it difficult for the  stockholders  to
receive a premium  for their  shares of our  common  stock in the event we enter
into  transactions  that require  stockholder  approval.  In  addition,  certain
provisions of Delaware law could have the effect of making it more  difficult or
more  expensive for a third party to acquire,  or of  discouraging a third party
from attempting to acquire control of us.

Exercise of warrants and options  will dilute  existing  stockholders  and could
decrease the market price of our common stock.

As of March 31, 2002, we had issued and outstanding  10,099,880 shares of common
stock and  outstanding  warrants  and options to purchase  2,328,352  additional
shares of common stock. The existence of the remaining  warrants and options may
adversely  affect the market price of our common stock and the terms under which
could obtain additional equity capital.

Our ability to raise  additional  capital through the sale of our securities may
be harmed by competing resales of our common stock by our stockholders.

The price of our  common  stock  could  fall if  stockholders  sell  substantial
amounts of our common stock.  Such sales could make it more  difficult for us to
sell  securities  at the  time  and  price we deem  appropriate.  To the  extent
stockholders  offer to and sell their shares of common  stock to  investors  for
less than the price  offered by us, our  attempt to sell our  securities  may be
adversely  affected.  In addition,  potential investors may not be interested in
purchasing  shares  of our  common  stock  on any  terms  if  stockholders  sell
substantial  amounts  of our common  stock.


                                       19
<PAGE>

Effectiveness  of our  registration  statement on Form SB-2 will dilute existing
stockholders and could decrease the market price of our common stock.

Once our registration statement is declared effective, certain stockholders will
be able to sell  approximately  4 million shares of our common stock and we will
be able to sell the equivalent of 7 million shares of our common stock. The sale
of common  stock and  warrants  covered by the  registration  statement by us or
Selling Stockholders will dilute existing  stockholders and may adversely affect
the market price of our common stock.

Our common stock is listed on the  Over-The-Counter  Bulletin  Board,  which may
make it more difficult for  stockholders  to sell their shares and may cause the
market price of our common stock to decrease.

Because our common stock is listed on the Over-The-Counter (OTC) Bulletin Board,
the liquidity of our common stock is impaired,  not only in the number of shares
that are bought and sold, but also through delays in the timing of transactions,
and  coverage  by  security  analysts  and the news  media,  if any, of us. As a
result,  prices for shares of our common stock may be lower than might otherwise
prevail  if our  common  stock was  traded on  NASDAQ or a  national  securities
exchange, like the American Stock Exchange.

Our stock  price may be volatile  and an  investment  in our common  stock could
suffer a decline in value.

The market price of our common stock may fluctuate  significantly in response to
a number of  factors,  some of which  are  beyond  our  control.  These  factors
include:

o    progress of our products through development and marketing;
o    announcements  of  technological  innovations  or new products by us or our
     competitors;
o    government   regulatory  action  affecting  our  products  or  competitors'
     products in both the United States and foreign countries;
o    developments or disputes concerning patent or proprietary rights;
o    actual or anticipated fluctuations in our operating results;
o    the loss of key management or technical personnel;
o    the loss of major customers or suppliers;
o    the outcome of any future litigation;
o    changes in our financial estimates by securities analysts;
o    fluctuations in currency exchange rates;
o    general market conditions for emerging growth and technology companies;
o    broad market fluctuations;
o    recovery from natural disasters; and
o    economic conditions in the United States or abroad.

Our charter  documents  and  Delaware  Law may have the effect of making it more
expensive or more difficult for a third party to acquire, or to acquire control,
of us.

Our certificate of incorporation makes it possible for our Board of Directors to
issue  preferred stock with voting or other rights that could impede the success
of any attempt to change  control of us. Our  certificate of  incorporation  and
bylaws  eliminate  cumulative  voting  which  may make it more  difficult  for a
minority  shareholder  to gain a seat on our Board of Directors and to influence
Board of  Directors'  decision  regarding a takeover.  Delaware Law  prohibits a
publicly  held   Delaware   corporation   from  engaging  in  certain   business
combinations with certain persons, who acquire our securities with the intent of
engaging in a business combination,  unless the proposed transaction is approved
in  a  prescribed  manner.   This  provision  has  the  effect  of  discouraging
transactions  not  approved by our Board of Directors as required by the statute
which may discourage  third parties from  attempting to acquire us or to acquire
control of us even if the attempt  would  result in a premium  over market price
for the  shares  of  common  stock  held by our  stockholders.

                                       20
<PAGE>

The  information  referred  to above  should be  considered  by  investors  when
reviewing any forward-looking statements contained in this report, in any of our
public filings or press releases or in any oral  statements made by us or any of
our officers or other persons acting on our behalf.  The important  factors that
could affect  forward-looking  statements are subject to change, and we disclaim
any obligation or duty to update or modify these forward-looking statements.

PART II: OTHER INFORMATION

ITEM 2 -CHANGES IN SECURITIES

     From  January 1, 2002 to March 31,  2002,  in  connection  with our private
placement  completed  December  2001,  one holder of the our warrants  exercised
1,750  warrants  on a  cashless  basis and was  issued  705 shares of our common
stock.  The shares  were  issued  pursuant to the  exemption  from  registration
provided by Section 4(2) of the Securities Act of 1933, as amended. During March
2002,  we  rescinded  one  transaction  entered into during 2001 for the sale of
25,000 shares of our common stock and warrants to purchase  25,000 shares of our
common stock. This transaction has been retroactively reflected in the financial
statements as of December 31, 2001.  No  underwriting  discounts or  commissions
were paid to any person.  As of March 12,  2002,  all notes  receivable  for the
purchase of Units we sold have been fully paid by the investors.

     On October  30,  2001,  we issued and sold  1,000,000  shares of our common
stock to one accredited investor in exchange for $2 million.  The purchase price
was $2.00 per share,  of which  $10,000 was payable in cash and  $1,990,000  was
payable in the form of a recourse  promissory  note,  payable at the  earlier to
occur of (i) six months after the registration  statement covering the shares is
declared  effective  or  (ii)  twelve  months  from  the  date  of the  purchase
agreement. We also agreed to issue up to 500,000 warrants to purchase our common
stock to the investor in the event the investor resells the shares at a purchase
price of at least $2 per share.  These warrants are  exercisable for one year at
an exercise price of $2 per share.  In March 2002,  when the shares could not be
registered with the Securities and Exchange Commission while the promissory note
was unpaid, we and the investor mutually  rescinded this transaction and we have
retroactively reflected this rescission as of December 31, 2001.

ITEM 6 -EXHIBITS AND REPORTS ON FORM 8-K

(a) EXHIBITS

Exhibit
No.       Description
-------   -----------

3.1       Restated Certificate of Incorporation by Color Imaging, Inc.

3.2       Restated Bylaws by Color Imaging, Inc.

11.1      Computation of Earnings Per Common Share

(b) REPORTS ON FORM 8-K

None.



                                       21
<PAGE>

SIGNATURES

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

                                           COLOR IMAGING, INC.


                                           /S/ MICHAEL W. BRENNAN
                                           ------------------------------------
May 1, 2002                                Michael W. Brennan
                                           Chairman and Chief Executive Officer


                                           /S/ MORRIS E. VAN ASPEREN
                                           ------------------------------------
                                           Morris E. Van Asperen
                                           Executive Vice President and
                                           Chief Financial Officer




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