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

                                    FORM 10-Q

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

                  For the quarterly period ended March 31, 2004

     [ ] 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                                       30071
 -----------------------------------------------                     ----------
    (Address of principal executive offices)                         (Zip code)


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


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 an  accelerated  filer (as
defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes No X

As of April 21, 2004, there were 12,713,005 shares of Common Stock outstanding.



<PAGE>


                               COLOR IMAGING, INC.
                          QUARTERLY REPORT ON FORM 10-Q
                  FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2004


                                      INDEX



PART I:   FINANCIAL INFORMATION

Item 1.   Financial Statements

          Condensed Balance Sheets at March 31, 2004
            (Unaudited) and December 31, 2003(Audited)........................3
          Condensed Statements of Operations (Unaudited)
            for the Three Months ended March 31, 2004 and 2003................4
          Condensed Statements of Cash Flows (Unaudited)
            for the Three Months ended March 31, 2004 and 2003................5
          Notes to Interim Unaudited Condensed Financial
            Statements .......................................................6

Item 2.   Management's Discussion and Analysis of Financial
          Condition and Results of Operations................................10
Item 3.   Quantitative and Qualitative Disclosures about Market Risks........22
Item 4.   Controls and Procedures ...........................................22



PART II:  OTHER INFORMATION

Item 1.   Legal Proceedings .................................................24
Item 2.   Changes in Securities, Use of Proceeds and
            Issuers Purchases of Equity Securities...........................24
Item 3.   Defaults Upon Senior Securities....................................25
Item 4.   Submission of Matters to a Vote of Security Holders................25
Item 5.   Other information .................................................25
Item 6.   Exhibits and Reports on Form 8-K...................................26
Signatures...................................................................28
Exhibits


                                        2


<PAGE>


                          PART I: FINANCIAL INFORMATION

ITEM 1 -FINANCIAL STATEMENTS

                               COLOR IMAGING, INC.
                            CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
<S>      <C>                                                              <C>                         <C>
                                                                              31-Mar-04                 31-Dec-03
                               ASSETS                                        (Unaudited)                (Audited)
                                                                           ---------------            ---------------
  CURRENT ASSETS:
         Cash                                                               $  1,570,656               $  2,213,830
         Accounts receivable - net of allowance for doubtful accounts
           of $69,250 and $67,839 for 2004 and 2003, respectively              2,411,021                  1,941,404
         Inventories                                                           5,656,671                  5,624,328
         Related party portion of IDR bond - current                              87,912                     87,912
         Other current assets                                                     61,533                    114,721
                                                                           ---------------            --------------
                           TOTAL CURRENT ASSETS                                9,787,793                  9,982,195
                                                                           ---------------            --------------
  PROPERTY, PLANT AND EQUIPMENT - NET                                          6,950,768                  6,973,834
                                                                           ---------------            --------------
  OTHER ASSETS:
         Related party portion of IDR bond                                       647,428                    647,428
         Other assets                                                             39,846                    291,978
                                                                           ---------------           ---------------
                                                                                 687,274                    939,406
                                                                           ---------------           ---------------
                                                                            $ 17,425,835               $ 17,895,435
                                                                           ===============           ===============
              - LIABILITIES & STOCKHOLDERS' EQUITY -

  CURRENT LIABILITIES:
         Revolving credit lines                                             $         --               $         --
         Accounts payable                                                      2,078,403                  2,413,695
         Current portion of notes payable                                          5,723                      5,612
         Current portion of notes payable - related parties                      340,042                    343,736
         Current portion of bonds payable                                        370,000                    370,000
         Other current liabilities                                               201,572                    393,579
                                                                           ---------------           ---------------
                         TOTAL CURRENT LIABILITIES                             2,995,740                  3,526,622
                                                                           ---------------           ---------------
  LONG TERM LIABILITIES:
         Notes payable                                                            10,037                     11,509
         Notes payable - related parties                                          26,481                    120,102
         Bonds payable                                                         2,725,000                  2,725,000
         Deferred tax liability                                                  359,650                    292,700
                                                                           ---------------           ---------------
                           LONG TERM LIABILITIES                               3,121,168                  3,149,311
                                                                           ---------------           ---------------
  TOTAL LIABILITIES                                                            6,116,908                  6,675,933
                                                                           ---------------           ---------------
  COMMITMENTS & CONTINGENCIES

  STOCKHOLDERS' EQUITY:
         Common stock, $.01 par value, authorized 20,000,000 shares;
           12,730,505 shares issued and outstanding on March 31, 2004            127,305                    127,305
           and December 31, 2003, respectively.
         Additional paid-in capital                                           12,708,368                 12,708,368
         Treasury stock at cost                                               (   13,105)                        --
         Accumulated deficit                                                  (1,513,641)                (1,616,171)
                                                                           ---------------           ---------------
                                                                              11,308,927                 11,219,502
                                                                           ---------------           ---------------
                                                                            $ 17,425,835               $ 17,895,435
                                                                           ===============           ===============
</TABLE>

See accompanying notes.

                                        3


<PAGE>


                               COLOR IMAGING, INC.
                       CONDENSED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)


                                                 THREE MONTHS ENDED MARCH 31,
                                                ------------------------------
                                                    2004               2003
                                                ------------      ------------
SALES                                           $ 5,601,217       $ 5,629,405
C0ST OF SALES                                     4,195,184         4,310,155
                                                ------------      ------------
GROSS PROFIT                                      1,406,033         1,319,250
                                                ------------      ------------
OPERATING EXPENSES
    Administrative                                  396,668           466,647
    Research & development                          310,176           271,967
    Sales & marketing                               598,084           367,274
                                                ------------      ------------
                                                  1,304,928         1,105,888
                                                ------------      ------------
INCOME FROM OPERATIONS                              101,105           213,362
                                                ------------      ------------

OTHER INCOME  (EXPENSE)
    Other income                                     93,580            48,146
    Financing expenses                              (23,955)          (75,966)
                                                ------------      ------------
                                                     69,625           (27,820)
                                                ------------      ------------

INCOME BEFORE TAXES                                 170,730           185,542
PROVISION FOR INCOME TAXES                           68,200            74,000
                                                ------------      ------------
NET INCOME                                      $   102,530       $   111,542
                                                ============      ============

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

     WEIGHTED AVERAGE
     SHARES OUTSTANDING
       Basic                                     12,730,505         9,332,780
       Assumed conversion                            17,857                --
                                                ------------      ------------
       Diluted                                   12,748,362         9,332,780
                                                ============      ============

See accompanying notes
                                        4


<PAGE>


                               COLOR IMAGING, INC.
                       CONDENSED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
<TABLE>
<CAPTION>
<S>                                                         <C>             <C>

                                                            THREE MONTHS ENDED MARCH 31,
                                                            ----------------------------
                                                                2004            2003
                                                            ------------    ------------
Cash flows from operating activities:
  Net income from continuing operations                     $   102,530     $   111,542
  Adjustments to reconcile net income to net cash
    (used in) operating activities:
        Depreciation and amortization                           148,404         146,726
        Deferred income taxes                                    66,950          72,000
    Decrease (increase) in:
        Accounts receivable and other receivables              (469,617)        115,455
        Inventories                                             (32,343)        163,228
        Prepaid expenses and other assets                       305,320         147,891
    Increase (decrease) in:
        Accounts payable and accrued liabilities               (527,299)       (869,387)
                                                            ------------    ------------
        Net cash (used in) operations                          (406,055)       (112,545)
                                                            ------------    ------------

Cash flows (used in) investing activities:
     Capital expenditures                                      (125,338)        (57,824)
                                                            ------------    ------------
        Net cash (used in)
             investing activities                              (125,338)        (57,824)
                                                            ------------    ------------
Cash flows from financing activities:
  Net (payments) under line of credit                                --      (1,022,470)
  Net proceeds from sale of common stock                             --       5,917,086
  Repurchase of common shares and warrants                      (13,105)        (59,223)
  Net (payments) under related party borrowings                 (97,315)       (250,947)
  Principal payments of long-term debt                           (1,362)     (1,332,407)
                                                            ------------    ------------
        Net cash (used in) provided by
             financing activities                              (111,781)      3,252,039
                                                            ------------    ------------
        Net (decrease) increase in cash                        (643,174)      3,081,670

Cash at beginning of year                                     2,213,830         128,501
                                                            ------------    ------------
Cash at end of period                                       $ 1,570,656     $ 3,210,171
                                                            ============    ============

Supplemental  disclosure of cash flow  Information:

         Cash paid during the period for:
         Interest and financing expense                     $    20,411     $    80,545
                                                            ============    ============
         Income taxes                                       $         0     $         0
                                                            ============    ============
</TABLE>


See accompanying notes


                                        5
<PAGE>


                               COLOR IMAGING, INC.
                 NOTES TO INTERIM CONDENSED FINANCIAL STATEMENTS
                                 March 31, 2004
                                   (Unaudited)

NOTE 1. BASIS OF PRESENTATION

The accompanying  unaudited  interim  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-Q.  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, 2004 are not
necessarily  indicative  of the results  that may be expected for the year ended
December 31, 2004


NOTE 2. COMMON STOCK AND EQUIVALENTS

During the first quarter ended March 31, 2004,  the Company  repurchased  in the
open market 17,500  shares of the Company's  common stock at an average price of
$0.75 per share.  On April 1, 2004, the shares were cancelled and retired by the
Company's transfer agent.

During the three  months  ended  March 31,  2004 the  Company  did not grant any
options to employees. In computing the number of options exercisable,  shares of
common stock subject to options or warrants that are  currently  exercisable  or
will  become  exercisable  within 60 days of the date of this  report are deemed
outstanding.  The following is a summary of total  outstanding  and  exercisable
options and stock warrants at March 31, 2004:


<TABLE>
<CAPTION>
<S>                           <C>         <C>                 <C>                     <C>          <C>

                                          Options and Warrants Outstanding             Options and Warrants Exercisable
                                                               Weighted-Average
Range of Exercise                           Weighted-Average        Remaining                       Weighted-Average
    Prices                     Number       Exercise Price     Contractual Life        Number        Exercise Price
---------------------         ---------     ----------------   -------------------     ---------    ----------------
Options $0.45-$2.75             970,000           $2.08             3.41 years          790,000           $2.25
Warrants $2.00                  100,000           $2.00             1.28 years          100,000           $2.00
                                            ----------------   -------------------     ---------    ----------------
Options and warrants          1,070,000           $2.07             3.20 years          890,000           $2.22
                                            ================                                        ================
</TABLE>


On April 1, 2004 the Company granted  options to an officer to purchase  100,000
shares of the  Company's  common  stock at an exercise  price of $.73 per share.
Options  to  purchase  20,000  shares  of  the  Company's  common  stock  vested
immediately  and the remainder  vest at the rate of 20,000 per year beginning on
the first anniversary date of the grant and continuing  annually  thereafter and
expire five years from their respective date of vesting.

NOTE 3. INVENTORIES

Inventories  consisted  of the  following  components  as of March 31,  2004 and
December 31, 2003:


                                       March 31, 2004    December 31, 2003
                                     -----------------   -----------------
Raw materials                          $ 1,271,928         $   631,960
Work-in-process                          1,930,297           1,715,684
Finished goods                           2,550,841           3,374,773
Obsolescence allowance                     (96,395)            (98,089)
                                     -----------------   -----------------
             Total                     $ 5,656,671         $ 5,624,328
                                     =================   =================


                                        6


<PAGE>


NOTE 4. CHANGES TO BORROWING ARRANGEMENTS

The Company has a $1.5 million  revolving  line of credit,  as amended,  with an
outstanding  balance  as of  March  31,  2004  of $0,  bearing  interest  at the
one-month  Libor  interest rate in effect two business days before the first day
of the  month  plus  2.50%.  As of March 31,  2004,  the  interest  rate was the
one-month Libor rate of 1.04% plus 2.50% (3.59%).  This revolving line of credit
has a June 30, 2004 expiration date.

Under  the line of  credit,  the  Company  is  permitted  to borrow up to 75% of
eligible accounts receivable and 50% of eligible inventories (up to a maximum of
$750,000 and not to exceed 50% of the total  outstanding).  On February 6, 2004,
the Bank issued an  irrevocable  standby  letter of credit in the amount of $1.5
million  for the benefit of a  non-affiliated  foreign  supplier.  The letter of
credit has an expiration date of June 30, 2005. The Company has granted the Bank
a security interest in all of the Company's assets as security for the repayment
of the line of credit and the obligations  under the letter of credit.  The Bank
agreement  also  contains  various  covenants  that the  Company is  required to
maintain,  and as of March 31, 2004,  the Company was in  compliance  with these
covenants.

NOTE 5. SIGNIFICANT CUSTOMERS

In the three month period ended March 31, 2004,  one customer  accounted for 30%
of net sales.  The Company  does not have a written or oral  contract  with this
customer.  All sales are made through purchase orders.  Accounts receivable from
this customer at March 31, 2004, was $619,860.

NOTE 6. SIGNIFICANT SUPPLIERS

In the three months ended March 31, 2004,  the Company  purchased 33% and 21% of
its raw materials,  components and supplies from two foreign  suppliers with the
latter being an affiliate.  On February 6, 2004,  the  Company's  Bank issued on
behalf of the Company an  irrevocable  standby letter of credit in the amount of
$1.5 million for the benefit of its largest  non-affiliated foreign supplier. At
March 31,  2004,  the  account  payable  to these  suppliers  was  $608,897  and
$255,476, respectively (see also Note 8).

NOTE 7. 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 from  continuing  operations for the three-month
periods ended March 31 are as follows:

                                                 2004            2003
                                             ------------    ------------
     Sales to Unaffiliated Customers:
     United States                           $ 3,182,361     $ 3,314,623
     Europe                                    1,222,352       1,142,286
     Mexico                                      808,546         670,635
     Asia                                        260,518         236,943
     All Others                                  127,440         264,918
                                             ------------    ------------
     Total                                   $ 5,601,217     $ 5,629,405
                                             ============    ============

                                        7


<PAGE>


NOTE 8. RELATED PARTY TRANSACTIONS:

(A)  LEASE:

Directors,  Jui-Hung  Wang,  Jui-Kung  Wang,  Sueling Wang and Jui-Chi Wang, own
Kings  Brothers,  LLC, the landlord from which the Company  leases its Norcross,
Georgia,  plant. The real property lease agreement between the Company and Kings
Brothers, LLC, was entered into on April 1, 1999, and was amended on February 5,
2003,  extending the expiration  date from March 31, 2009 to March 31, 2013. The
rental payments for quarter ended March 31, 2004, were $136,182.

(B) INDUSTRIAL DEVELOPMENT REVENUE BOND

On June 1, 1999, the Development  Authority of Gwinnett County (the  Authority),
issued  $4,100,000  of  industrial  development  revenue  bonds on behalf of the
Company and Kings Brothers, LLC. The 1.03% revenue bonds, 2.03% inclusive of the
1% letter of credit fee,  as of March 31,  2004,  are payable in varying  annual
principal and monthly interest  payments through July 2019. The bond is secured,
as amended on April 7, 2003, by specific  equipment assets of the Company and by
real  property  owned by Kings  Brothers,  LLC. The bonds along with the line of
credit and term loan are held by two related financial institutions.

A loan agreement  between the Authority and the Company and Kings Brothers,  LLC
allows  funds to  effectively  pass through the  Authority  to the Company.  The
majority of the proceeds,  $3,125,872,  were used by the Company to purchase and
install  certain  manufacturing  equipment,  while  $974,128  was  used by Kings
Brothers,  LLC to pay  down the  mortgage  on the real  property  leased  to the
Company.  The Company and the Related  Party are jointly  obligated to repay any
outstanding debt. Under the Joint Debtor Agreement of June 28, 2000, between the
Company and the Kings  Brothers,  LLC, each has agreed to be  responsible to the
other for their share of the bond  obligations and that any party causing an act
of default shall be responsible for 100% of the bond obligations. The amount for
which Kings Brothers,  LLC is responsible to the Company is reflected in current
and  other  assets of the  Company.  Kings  Brothers,  LLC  amounts  owed to the
Authority are secured by a lien on the real  property  leased by the Company and
by a personal guarantee,  as amended,  executed by Director and President of the
Company,  Sueling  Wang.  At this  time,  the  Company  believes  that the Kings
Brothers,  LLC portion of the bond is fully  collectible.  As of March 31, 2004,
the bond  principal  outstanding  was  $3,095,000 and the portion due from Kings
Brothers, LLC was $735,340.

(C)  PURCHASES:

The Company  purchased  from an  affiliate  for the three months ended March 31,
2004,  $730,065 of injection  molded  cartridges and accessories for copiers and
laser  printers.  Accounts  payable  to the  affiliate  at March 31,  2004,  was
$255,476. See also Note 6.

(D) MARKETING AND LICENSE AGREEMENT:

On June 1, 2003,  the Company  entered into a Marketing and Licensing  Agreement
with its foreign  affiliate.  Per the  Marketing  and  Licensing  Agreement  the
affiliate  agrees to indemnify  and hold  harmless the Company for any costs and
expense  arising  from any  defective  licensed  product,  and/or  any  recalled
licensed product including  litigation arising therefrom.  Further the affiliate
agrees to credit the Company for product  cost,  shipping  and related  expenses
arising  from any  defective  licensed  product,  and/or any  recalled  licensed
product.

(E) NOTES PAYABLE:

On March 14, 2002, the Company borrowed $500,000 from director, Sueling Wang, on
an unsecured basis. The interest rate on the loan was 12% per annum,  matured on
March 14, 2003 and is evidenced in writing.  On September 2, 2002,  the note was
modified to extend the term to March 1, 2005,  provide for a $100,000  principal
payment, decreased the interest rate to 6% per annum, provided for interest only
payments  through  February 28, 2003, and 24 monthly  payments of principal with
interest extra beginning on April 1, 2003, in the amount of $7,500.  The Company
borrowed the $500,000 to meet a supplier  commitment for product.  Principal and
interest  paid Sueling Wang on the note for the quarter ended March 31, 2004 was
$22,500 and $1,086, respectively. As of March 31, 2004 the principal outstanding
was $82,500.

On August 21, 2002, the Company borrowed  $100,000 from director,  Jui-Chi Wang,
on an  unsecured  basis.  The loan bears  interest  at the rate of 6% per annum,
matures on March 1, 2005 and is evidenced in writing.  The Company borrowed this
amount in order to repay $100,000  borrowed from director  Sueling Wang on March
14, 2002. The note is interest only through February 28, 2003, and then is fully
amortizing over 24 months with principal and interest  payments  payable monthly
beginning  April 1, 2003 in the amount of $4,434.  Principal  and interest  paid
Jui-Chi  Wang on the note for the  quarter  ended March 31, 2004 was $12,469 and
$833, respectively. As of March 31, 2004 the principal outstanding was $47,337.


                                        8


<PAGE>


NOTE 8. RELATED PARTY TRANSACTIONS (C0NTINUED):

(E) NOTES PAYABLE (CONTINUED):

On August 21 and September 2, 2002, the Company borrowed  $200,000 and $300,000,
respectively,  from  director,  Jui-Hung Wang, on an unsecured  basis.  The loan
bears  interest  at the rate of 6% per  annum,  matures  on March 1, 2005 and is
evidenced  in  writing.  The  Company  borrowed  this  amount in order to make a
principal  payment due on its  industrial  development  bond in the  approximate
amount of $255,000,  for the acquisition of capital equipment in the approximate
amount of $125,000 and for general corporate purposes. The note is interest only
through  February 28,  2003,  and then is fully  amortizing  over 24 months with
principal and interest  payments payable monthly  beginning April 1, 2003 in the
amount of $22,170. Principal and interest paid Jui-Hung Wang on the note for the
quarter ended March 31, 2004 was $62,345 and $4,163,  respectively.  As of March
31, 2004 the principal outstanding was $236,686.

(F) COMMON STOCK

On March 6, 2003, the Company  received from Chi Fu Investment Co Ltd $6,075,000
of  subscription  proceeds for the public sale of 4,500,000 of its common shares
at a price of $1.35  per  share in its  offering  on Form  SB-2  filed  with the
Securities and Exchange  Commission.  Chi Fu Investment Co Ltd is a wholly owned
subsidiary of the Company's affiliate,  General Plastic Industrial Co., Ltd, and
as of March 31, 2004, Company directors  Jui-Hung Wang,  Jui-Chi Wang,  Jui-Kung
Wang and  Sueling  Wang each owned  9.69%,  10.17% and 1.77%,  respectively,  of
General Plastic Industrial Co., Ltd.

                                        9


<PAGE>


ITEM 2.

MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS

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

BACKGROUND

On June 28, 2000,  Color  Imaging,  formerly known as Advatex  Associates,  Inc.
merged with Logical Imaging  Solutions,  Inc. and Color Image,  Inc. and Logical
Imaging Solutions and Color Image became  wholly-owned  subsidiaries of Advatex.
On December 31,  2000,  Color Image was merged with and into Color  Imaging.  On
September 30, 2002, we divested  Logical  Imaging  Solutions in exchange for 1.7
million  shares of our common  stock and  warrants  to purchase up to 15% of the
common stock of Digital Color Print or Logical Imaging Solutions.  As the result
of our disposing of Logical Imaging Solutions,  Inc. we no longer offer printing
systems to commercial  printers nor the support services and consumables related
thereto.  As a further result of Color Imaging's  divestiture of Logical Imaging
Solutions,  our  investments  in the  furthering of Logical  Imaging  Solutions'
technologies and carrying its operations have ceased.  Significantly,  since the
merger on June 28, 2000, Color Imaging had invested  approximately $2.35 million
in the  operations  of Logical  Imaging  Solutions  and the  development  of its
technologies.

COLOR IMAGING, INC.

Since 1989, Color Imaging has developed, manufactured and marketed products used
in electronic printing. Color Imaging formulates and manufactures black text and
specialty toners,  including color and magnetic character recognition toners for
numerous laser printers, facsimile machines and analog and digital photocopiers.
Color  Imaging'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  character  recognition  toners enable the printing of magnetic
characters  that are required for the high-speed  processing of checks and other
financial documents.  Color Imaging also supplies other consumable products used
in electronic printing and photocopying,  including toner cartridges,  cartridge
components, photoreceptors and imaging drums.

Color  Imaging  has  continually  expanded  its product  line and  manufacturing
capabilities.   This  expansion,   including  expansion  through  sourcing  from
strategic  partners,  has led to the  creation  over the  years of  hundreds  of
different black text, color,  magnetic 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),  and Panasonic(TM).  Color Imaging also
manufactures   and/or   markets   toners  for  use  in  Ricoh(TM),   Lanier(TM),
Gestetner(TM),   Savin(TM),  Sharp(TM),   Xerox(TM),   Canon(TM),   Minolta(TM),
Konica(TM),  and Toshiba(TM)  copiers.  Color Imaging  markets branded  products
directly to OEMs and its  aftermarket  products  worldwide to  distributors  and
re-manufacturers of laser printer toner cartridges and to OEM,  distributors and
dealers of copier products.

Our strategy for growing  revenue and operating  profit is to expand,  including
through strategic acquisition(s),  our printer and copier products business. The
key  elements  of our  strategy  are  (1)  increasing  vertical  integration  by
supplying complete toner and cartridge devices, (2) capitalizing on our research
and development  expertise of producing specialty,  color and digital copier and
or  multifunctional  device toners,  (3) exploiting the efficiencies  associated
with the investment made in manufacturing facilities,  (4) expanding our sources
for products  from  strategic  suppliers  that we can add value to or resell and
that  complement our product lines,  (5) expanding into new geographic  markets,
and (6) broadening our sales channels.

RECENT DEVELOPMENTS

On April 1, 2004,  Patrick J. Wilson joined Color  Imaging,  Inc. as Senior Vice
President of Marketing and Sales. With over thirty years in the copier and toner
industry in executive, general management, marketing, manufacturing and sourcing
positions,  Mr.  Wilson  brings  significant  expertise in  management,  product
development  and  marketing  to  Color  Imaging.  Prior to his  appointment,  he
consulted  with  Color  Imaging  for  three  years;   and  was  instrumental  in
significantly  expanding our copier product line and distribution  channels. Mr.
Wilson  began his career with 3M Copier  Division  which  became  Harris/3M  and
eventually  Lanier  Worldwide,  a $1.2  billion  company.  He has a BS degree in
Chemical Engineering from Michigan Tech and an MBA from Xavier University.



                                       10


<PAGE>


OVERVIEW

The following  discussion and analysis  should be read in  conjunction  with our
financial  data and our Financial  Statements and notes  appearing  elsewhere in
this report.

Net sales for the three  months ended March 31, 2004  declined by  approximately
$28,000,  or less than 1%, to $5.6 million,  compared to 2003. Net sales in 2004
decreased  primarily due to reduced sales to our largest customers for the first
quarter  2004  compared to the same period of 2003.  In the three  months  ended
March 31, 2004 and 2003, our net sales were primarily generated from the sale of
finished consumable  products for electronic printers and photocopying  machines
and  comprised  approximately  76% and 71% of net sales,  respectively.  For the
three months  ended March 31, 2004 and 2003,  our two largest  imaging  products
customers  accounted for 30% and 5% and 33% and 19% of net sales,  respectively.
Sales to these customers consist  primarily of analog copier products,  and as a
result are expected to decline over time.

Net sales made  outside of the United  States  increased to  approximately  $2.4
million,  or 43% of total  sales  for the three  months  ended  March 31,  2004,
compared to $2.3 million, or 41% for the three months ended March 31, 2003. This
increase in international sales resulted primarily from the increase in sales to
customers other than our two largest customers.

The following table reflects the consolidated new orders,  net of cancellations,
revenues and backlog as of the beginning and end of the three months ended March
31, 2004, as well as for Color Imaging's two general product lines.


                              Backlog                            Backlog
                             at start                             at end
                                of         New         Net          of
                               Year       Orders     Revenue     Quarter
                             --------    --------    --------    --------
                                         (IN THOUSANDS OF DOLLARS)
2004:
  Copier Products            $  1,896    $  4,110    $  3,927    $  2,079
  Printer Products                575       1,783       1,674         684
                             --------    --------    --------    --------
     Total                      2,471       5,893       5,601       2,763
                             ========    ========    ========    ========


CRITICAL ACCOUNTING ESTIMATES

"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations"  discusses  our  financial  statements  that have been  prepared  in
accordance with accounting principles generally accepted in the United States of
America.  The  preparation  of these  financial  statements  requires us to make
estimates  and  assumptions  that  affect  the  reported  amount of  assets  and
liabilities  at  the  date  of  the  financial  statements,  the  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the reported amounts of revenues and expenses during the reporting period.

On an on-going basis,  we evaluate our estimates and judgments,  including those
related to revenue recognition,  valuation allowances for inventory and accounts
receivable,  warranty and impairment of long-lived assets. We base our estimates
and  judgments on  historical  experience  and on various  other factors that we
believe to be reasonable under the circumstances.  The result of these estimates
and judgments form the basis for making  conclusions about the carrying value of
assets and liabilities that are not readily apparent from other sources.  Actual
results  may  differ  from  these  estimates  under  different   assumptions  or
conditions.  Our  significant  estimates  and  assumptions  are reviewed and any
required adjustments are recorded on a quarterly basis.

A critical  accounting  policy is one that is both important to the portrayal of
Color Imaging's financial  condition and results and requires  management's most
difficult,  subjective  or complex  judgments,  often as a result of the need to
make  estimates  about the  effect of  matters  that are  inherently  uncertain.
Management  believes the following critical  accounting policies affect its more
significant  judgments  and  estimates  in  the  preparation  of  its  financial
statements.

VALUATION ALLOWANCE FOR ACCOUNTS RECEIVABLE. We maintain allowances for doubtful
accounts for estimated  losses  resulting from the inability of our customers to
make required  payments.  These  allowances are based on historical  experience,
credit  evaluations and specific customer  collection issues we have identified.
Since our accounts  receivable are often concentrated in a relatively few number
of customers, a significant change in the liquidity or financial position of any
one  of  these   customers   could  have  a  material   adverse  impact  on  the
collectibility of our accounts receivable and our future operating results.


                                       11


<PAGE>


INVENTORY VALUATION.  Our inventories are recorded at the lower of standard cost
or the current  estimated  market value. 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.  Demand  for our  products  has  fluctuated
significantly and may do so in the future,  which could result in an increase in
the cost of inventory or an increase in excess inventory  quantities on hand. 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 they 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.  If assumptions  about future demand or actual market conditions are
less  favorable  than those  projected by  management,  write-downs of inventory
could be required,  and there can be no assurance that future  developments will
not necessitate further write-downs.

VALUATION OF LONG-LIVED  ASSETS.  We  periodically  evaluate  whether events and
circumstances  have occurred  which may affect the estimated  useful life or the
recoverability  of the remaining balance of our long-lived  assets,  such as our
investment in our toner  manufacturing  equipment.  We have  approximately  $8.1
million invested in such equipment and plant improvements, with a carrying value
of $6.5  million,  that  have  estimated  lives of up to  twenty  years.  Should
competing   technologies  or  offshore   competitors   cause  our  manufacturing
technology  to be  non-competitive,  or should  other  events  or  circumstances
indicate that the carrying amount of these assets would not be recoverable,  the
estimated life of these assets may need to be shortened and their carrying value
could be materially affected. If the sum of the undiscounted expected cash flows
from an asset to be held and used in operations is less than the carrying  value
of the asset, an impairment loss is recognized.

WARRANTY.  We provide a limited  warranty,  generally  ninety (90) days,  to all
purchasers  of our  products.  Accordingly,  we do not make a provision  for the
estimated  cost of providing  warranty  coverage,  and instead we expense  these
costs as they are  incurred.  On  occasion,  we have  been  required  and may be
required in the future to provide  additional  warranty  coverage to ensure that
our products are ultimately accepted or to maintain customer goodwill. While our
warranty costs have historically not been significant,  we cannot guarantee that
we will continue to experience a similar level of predictability  with regard to
warranty  costs as we have in the past. In addition,  the  introduction  of more
expensive finished products, technological changes or previously unknown defects
in raw  materials  or  components  may  result in more  extensive  and  frequent
warranty claims than anticipated,  which could have a material adverse impact on
our  operating   results  for  the  periods  in  which  such  additional   costs
materialize.

RESULTS OF OPERATIONS

Color Imaging's net sales were $5.6 million for the three months ended March 31,
2004, a decrease of  approximately  0.5% from March 31,  2003.  The net sales by
product category were as follows:

<TABLE>
<CAPTION>
 <S>                                 <C>         <C>    <C>          <C>         <C>
                                                        % Increase
 (Dollars in thousands)                 2004       %    (Decrease)      2003       %
                                     ----------  -----  ----------   ----------  -----
Product Category:
 Cartridges and bottles
  Copier finished products            $ 3,600      64%      18%      $ 3,051      54%
  Printer finished products               660      12%     (32%)         966      17%
                                     ----------         ----------   ----------
                                        4,260      76%       6%         4,017     71%

Bulk toner and parts                    1,341      24%     (17%)        1,612     29%
                                     ----------         ----------   ----------
      Total net revenue               $ 5,601     100%     ( 1%)      $ 5,629    100%
                                     ==========         ==========   ==========
</TABLE>


                                       12


<PAGE>


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

                                                   THREE MONTHS ENDED
                                                        MARCH 31,
                                                 ----------------------
                                                  2004            2003
                                                 ------          ------
                                                (PERCENTAGE OF NET SALES)

     Net sales                                     100             100
     Cost of sales                                  75              77
     Gross profit                                   25              23
     Administrative expenses                         7               8
     Research and development                        5               5
     Sales and marketing                            11               6
     Operating income                                2               4
     Interest expense                                1               1
     Depreciation and amortization                   2               3
     Income before taxes                             3               3
     Provision for income taxes                      1               1
     Net income                                      2               2


THREE MONTHS ENDED MARCH 31, 2004 COMPARED TO THREE MONTHS ENDED MARCH 31, 2003

NET SALES. Our net sales decreased by $28,000,  or 0.5%, to $5.6 million for the
three  months  ended March 31,  2004,  from $5,629  million for the three months
ended March 31, 2003.  Net sales made in the United States were $3.2 million,  a
decrease of $0.1 million, or 4%, from $3.3 million made in the comparable period
in 2003. Net sales made outside of the United States  increased by approximately
$0.1  million,  or 4%, for the current  quarter  compared to the same quarter of
2003.  The decrease in net sales for the current  quarter  compared to that of a
year ago from our two largest  customers was offset by the increase in our sales
to other customers. Of the $5.6 million in net sales, $3.6 million, or 64%, were
attributable  to our  copier  finished  products,  while net sales of these same
products  were $3.1  million,  or 54%, for the  comparable  period in 2003.  The
revenue  increase  from  copier  finished  products  from  2003 to 2004 was 18%,
reflecting  primarily  increased  sales of our color toner products to customers
other than our two largest  customers.  Sales of our laser finished products for
the three months ended March 31, 2004 were $.66 million compared to $.97 million
for the same period of 2003.  We believe that sales of our copier  products will
continue to increase while sales of our laser printing products will be level or
decrease  during 2004,  as the result of the sales of new copier color  products
recently introduced and increased competition for laser printer products.

COST OF GOODS SOLD. Cost of goods sold decreased by approximately  $115,000,  or
3%, to $4.2  million from $4.3 million for the three months ended March 31, 2004
and for the comparable  period in 2003,  primarily as the result of the decrease
in lower margin net sales to our two largest customers.  Cost of goods sold as a
percentage of net sales decreased by 2 percentage  points from 77% for the three
months  ended March 31, 2003 to 75% for the three  months  ended March 31, 2004,
primarily  as the result of reduced  sales  derived from certain very low margin
products  previously  sold to our largest  customer and a larger  percentage  of
sales being derived from sales of products with higher gross  margins.  With the
expected  increase in sales  derived  from our copier color toner  products,  we
expect our cost of goods sold to further  decrease as a percentage  of net sales
even with  increased  sales  derived  from very low  margin  all in one  imaging
products.

GROSS PROFIT.  As a result of the above factors,  gross profit increased to $1.4
million in the three  months ended March 31, 2004 from $1.3 million in the three
months ended March 31, 2004, or approximately  $89,000,  while net sales for the
same period  decreased by $28,000.  Gross  profit as a  percentage  of net sales
increased  by 2  percentage  points from 23% to 25% for the three  months  ended
March 31, 2004, as compared to the corresponding period of the prior year.

OPERATING  EXPENSES.  Operating expenses increased $.2 million,  or 18%, to $1.3
million in the three  months ended March 31, 2004 from $1.1 million in the three
months  ended  March 31,  2003.  General  and  administrative,  selling  and R&D
expenses  increased,  as a percentage  of net sales,  to 23% in the three months
ended March 31, 2004 from 20% in the three months ended March 31, 2003.  General
and administrative  expenses decreased approximately 15%, or $70,000 to $397,000
for the three  months ended March 31, 2004 from the  comparable  period in 2003,
largely  resulting from decreased legal and professional fees in connection with
our offering on Form SB-2 and our stock repurchase negotiations from an investor
in our private  placement  closed in 2001 and no provision  having been made for
the bonus plan for 2004. Selling expenses increased by $231,000,  or 63%, in the
three months  ended March 31, 2004  compared to the three months ended March 31,
2003. Selling expenses increased  primarily as a result of increased  commission
and expense  reimbursements of our manufacturer's  representatives,  advertising
and  promotional  expenses and expenses in connection  with our recently  opened
West Coast sales office. Research and development expenses increased by $38,000,
or 14%, to $310,000 in the three months  ended March 31, 2004,  primarily as the
result of increased payroll expenses and expenditures for product testing.


                                       13

<PAGE>

OPERATING INCOME.  As a result of the above factors,  operating income decreased
by $112,000, or 53%, to a profit of $101,000 in the three months ended March 31,
2004 from $213,000 in the three months ended March 31, 2003.

INTEREST AND FINANCE EXPENSE.  Interest expense decreased by $52,000, or 68%, in
the three  months  ended  March 31, 2004 from the three  months  ended March 31,
2003. The decrease was primarily the result of reduced  borrowings,  having used
proceeds from our public offering on Form SB-2 to retire debt.

OTHER INCOME.  Other income increased by $46,000, or 94%, from income of $48,000
to income of $94,000 in the three  months  ended  March 31,  2004 from the three
months ended March 31, 2003,  primarily as the result of income derived from the
exchange of Euros.

INCOME  TAXES.  As the result of our profit in the three  months ended March 31,
2004, we recorded an income tax  provision of $68,200 for the period,  while the
income tax provisions were $74,000 for the three months ended March 31, 2003.

LIQUIDITY AND CAPITAL RESOURCES

At March 31, 2004, and December 31, 2003, our working  capital and current ratio
was  approximately  $6.8  million and $6.5  million and 3.27 to 1 and 2.83 to 1,
respectively.  Our working  capital and current ratio have  benefited  primarily
from the net  proceeds  we  received  from the public  sale of our common  stock
during March 2003.

Cash flows used by operating  activities were $406,000 in the three months ended
March 31, 2004  compared to $112,000 in the three  months  ended March 31, 2003.
The cash flows used by continuing operating activities in the three months ended
March 31, 2004  increased  primarily due to the increase in accounts  receivable
and a decrease in accounts payable and other liabilities.

Cash flows used in investing  activities were $125,000 in the three months ended
March 31,  2004,  compared to $58,000 in the three  months ended March 31, 2003.
The  increase in cash used in  investing  activities  in the three  months ended
March 31, 2004, was entirely  attributable to increased capital  expenditures in
connection with improvements being made to our factory.

The Company has a $1.5 million  revolving  line of credit,  as amended,  with an
outstanding  balance  as of  March  31,  2004  of $0,  bearing  interest  at the
one-month  Libor  interest rate in effect two business days before the first day
of the  month  plus  2.50%.  As of March 31,  2004,  the  interest  rate was the
one-month Libor rate of 1.04% plus 2.50% (3.59%).  This revolving line of credit
has a June 30, 2004 expiration  date, and we plan to renew it for up to one year
to expire June 30, 2005.  Under the line of credit,  the Company is permitted to
borrow up to 75% of eligible accounts receivable and 50% of eligible inventories
(up to a maximum of $750,000 and not to exceed 50% of the total outstanding). On
February 6, 2004, the Bank issued an irrevocable standby letter of credit in the
amount of $1.5 million for the benefit of a non-affiliated foreign supplier. The
letter of credit has an expiration  date of June 30, 2005,  and  guarantees  the
payment of moneys owed the supplier  for  materials  purchased  from them by the
Company. At March 31, 2004, the Company's accounts payable to this supplier were
approximately  $609,000. The Company has granted the Bank a security interest in
all of the Company's  assets as security for the repayment of the line of credit
and the obligations under the letter of credit.

The Bank agreement also contains various  covenants that the Company is required
to maintain,  and as of March 31, 2004, the Company was in compliance with these
covenants.

Cash  flows  used by  financing  activities  were  $112,000,  primarily  for the
repayment of affiliate  debt, for the three months ended March 31, 2004 compared
to cash flows provided by financing activities of $3,252,000 for the same period
in 2003,  resulting largely from the $5,917,000 in net proceeds received for the
public sale of our common stock to an affiliate.

On April 18, 2003, Color Imaging  established a stock  repurchase  program under
which Color  Imaging's  common stock,  with an aggregate  market value up to the
lesser of $1 million or 1 million shares,  may be acquired in the open market or
through private or other transactions. Through April 21, 2004, Color Imaging has
repurchased 62,000 shares of our common stock for approximately  $42,000, or for
an average price of $0.678 per share.

We believe  that  existing  cash  balances,  cash  expected to be  generated  by
operating activities,  and funds available under our credit facility will be, in
aggregate,  sufficient to finance our operating and investing  activities for at
least  the  next 12  months,  which  will  include  expenditures  not to  exceed
approximately $450,000 for manufacturing,  $150,000 for research and development
equipment,  $175,000  potentially for computer  software upgrades to accommodate
electronic  data  interchange,  the  repurchase  of our  stock  under  the stock
repurchase  program of up to the lesser of $1,000,000 or 1,000,000 shares of our
common  stock  and  any  advances  made  by our  bank on our  behalf  under  our
off-balance  sheet  arrangement  of $1.5 million for a standby  letter of credit
issued to a non-affiliated foreign supplier.


                                       14


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

RISK FACTORS

RISKS RELATED TO OUR BUSINESS:

OUR BUSINESS DEPENDS ON A LIMITED NUMBER OF CUSTOMERS.

For the quarter ended March 31, 2004, two customers  accounted for approximately
35% 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 either  of these  customers,
including through an acquisition, other business combination or the loss by them
of business from their  customers 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 or substantial  portions of our business with one or more of our major
customers. If we do not sell products or services to customers in the quantities
anticipated,  or if a major customer reduces or 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  RELIANCE ON SALES TO A FEW MAJOR  CUSTOMERS  AND  GRANTING  CREDIT TO THOSE
CUSTOMERS PLACES US AT FINANCIAL RISK.

As of March 31, 2004,  receivables from two customers  comprised 29% of accounts
receivable.  A concentration of our receivables from a small number of customers
places us at risk should these receivables become  uncollectible.  If any one or
more of our major  customers is unable to pay us it could  adversely  affect our
results of operations and financial condition.  Color Imaging attempts to manage
this credit risk by performing  credit  checks,  requiring  significant  partial
payments  prior  to  shipment  where   appropriate,   and  actively   monitoring
collections.

APPROXIMATELY  35% OF OUR BUSINESS DEPENDS ON A FOREIGN SUPPLIER APPROVED BY TWO
OF OUR CUSTOMERS.

Some  of  our  products  incorporate  technologies  that  are  available  from a
particular  foreign  supplier  that has been  approved by one of our  customers.
Approximately 35% of our sales for the quarter ended March 31, 2004 were derived
from  products  limited to a specific  foreign  supplier.  For the quarter ended
March 31,  2004,  we  purchased  33% of our  supplies  from  that  same  foreign
supplier. We do not have a written agreement with this or any other supplier. We
rely on purchase orders.  Should we be unable to obtain the necessary  materials
from this foreign  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.

IF OUR CRITICAL SUPPLIERS FAIL TO DELIVER SUFFICIENT  QUANTITIES OF MATERIALS OR
PRODUCTS IN A TIMELY AND  COST-EFFECTIVE  MANNER IT COULD NEGATIVELY  AFFECT OUR
BUSINESS.

We use a wide range of materials in the manufacture of our products,  and we use
numerous  suppliers  to supply  materials  and  certain  finished  products.  We
generally do not have guaranteed supply arrangements with our suppliers. Because
of the  variability and uniqueness of customers'  orders,  we do not maintain an
extensive  inventory of materials  for  manufacturing  or resale.  Key suppliers
include  providers  of  special  resins,  toners  and  toner  related  products,
including those from our largest supplier who is also foreign, and our injection
molder  affiliate  that  provides   plastic  bottles,   cartridges  and  related
components designed to avoid the intellectual property rights of others.

Although we make  reasonable  efforts to ensure that raw  materials,  toners and
certain  finished  products are available from multiple  suppliers,  this is not
always possible;  accordingly, some of these materials are being procured from a
single  supplier or a limited  group of suppliers.  Many of these  suppliers are
outside the United States,  including our largest supplier,  resulting in longer
lead-times  for many  important  materials,  which could cause delays in meeting
shipments  to our  customers.  We have  sought,  and will  continue to seek,  to
minimize the risk of production interruptions and shortages of key materials and
products by:

     o    selecting and qualifying  alternative  suppliers for key materials and
          products;
     o    monitoring the financial stability of key suppliers; and
     o    maintaining appropriate inventories of key materials and products.

There can be no assurance that results of operations  will not be materially and
adversely  affected  if,  in the  future,  we do not  receive  in a  timely  and
cost-effective manner a sufficient quantity of raw materials, toners or finished
products to meet our production or customer delivery requirements.

                                       15
<PAGE>
OUR  SUCCESS IS  DEPENDENT  ON OUR  ABILITY TO UTILIZE  AVAILABLE  MANUFACTURING
CAPACITY.

From 1999 through 2000, we expanded our manufacturing  capacity by acquiring new
manufacturing  equipment and moving to a larger location.  Thereafter we further
expanded our capacity by placing in service additional  manufacturing  equipment
during 2002 and 2003. 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  in  increasing  the sales of our
manufactured  products,  or if our  existing  sales from  manufactured  products
declines, our business will be materially and adversely affected.

OUR SUCCESS IS DEPENDENT ON OUR ABILITY TO SUCCESSFULLY  DEVELOP, OR USE OR HAVE
ACCESS  TO  THIRD  PARTIES',  INTELLECTUAL  PROPERTY  OR  PRODUCTS  THAT  WE CAN
COMMERCIALIZE AND THAT ACHIEVE MARKET ACCEPTANCE.

Our success depends in part on our ability to develop proprietary toner formulas
and  manufacturing  processes,  maintain  trade  secret  protection  and operate
without  infringing  the  proprietary   rights  of  others.   Future  claims  of
intellectual  property  infringement  could prevent us from  obtaining  products
incorporating the 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 or those  acquired  from others  infringe the
intellectual property rights of another.

Success in the  aftermarket  imaging  industry  depends,  in part, on developing
consumable  products that are  compatible  with the printers,  photocopiers  and
facsimile  machines  made by the OEMs,  and that have a selling  price less than
that of like consumable  supplies  offered by the OEM. For example,  if the OEMs
introduce chemical toners with better imaging characteristics and higher yields,
microprocessor  chips  that  communicate  between  the toner  cartridge  and the
device, or introduce products using patented or other proprietary  technologies,
then the aftermarket  industry has to respond with ongoing development  programs
to offer compatible  products that emulate the OEMs' without infringing upon the
OEM's intellectual property.

Technical innovations are inherently complex and require long development cycles
and appropriate  professional  staffing.  Our future business success depends on
our  ability,  and that of  critical  suppliers,  to develop and  introduce  new
products that successfully  address the changing  technologies of the OEMs, meet
the customer's  needs and win market  acceptance in a timely and  cost-effective
manner.  If we do not develop and introduce  products  compatible with the OEM's
technologies  in a timely  manner in response to changing  market  conditions or
customer requirements, our business could be seriously harmed.

The challenges we face in implementing  our business model include  establishing
market acceptance of existing products and successfully  developing or acquiring
new products for resale that achieve  market  acceptance.  We must  successfully
commercialize the products that are currently being developed, such as our color
and magnetic  character  recognition toner for printers and black text and color
toners for new digital copiers 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, we have
not commercialized many of the toners that are under development.  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  for
resale  from  third  parties,  or if  these  products  fail  to  achieve  market
acceptance,  our financial condition and results of operation would be seriously
harmed.

OUR BUSINESS MIGHT BE ADVERSELY AFFECTED BY OUR DEPENDENCE ON FOREIGN BUSINESS.

We sell a  significant  amount of  product  to  customers  outside of the United
States.  International  sales  accounted  for 43% and  41% of net  sales  in the
quarters ended March 31, 2004 and 2003,  respectively.  We expect that shipments
to  international  customers will continue to account for a material  portion of
net sales.  During the  quarter  ended  March 31,  2004,  our sales were made to
customers outside the United States as follows:

     o    Europe (including Eastern Europe) - 22%
     o    Mexico - 14%
     o    Asia/Southeast Asia - 5%
     o    Other - 2%

                                      16
<PAGE>
Most of our products sold  internationally,  including  those sold to our larger
international  customers, are on open account, giving rise to the added costs of
collection in the event of non-payment.  On foreign customer accounts other than
those we feel are  credit  worthy  and  justify  open  credit  terms with us, we
mitigate the risk of non-payment and collection of foreign  accounts  receivable
by obtaining  foreign credit insurance on those customers who qualify.  Further,
should a product shipped  overseas be defective,  Color Imaging would experience
higher costs in connection with a product recall or return and replacement.

Most of our sales are  priced in U.S.  dollars,  but  because  we began  selling
products in Europe  denominated in Euros during 2001,  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.  We recorded gains of approximately $55,000
and $37,000 during the quarters ended March 31, 2004 and 2003, respectively,  as
a result of foreign currency transactions.

While our  business  has not been  materially  affected  in the past by  foreign
business or  currency  fluctuations,  because of our  increasing  dependence  on
international  revenues, our operating results could be negatively affected by a
continued or  additional  decline in the  economies  of any of the  countries or
regions  in which we do  business.  Periodic  local  or  international  economic
downturns,  trade balance issues,  changes to duties,  tariffs or  environmental
regulations,  political  instability  and  fluctuations in interest and currency
exchange rates could negatively affect our business and results of operations.

We cannot assure you that these factors will not have a material  adverse effect
on our international sales and would, as a result,  adversely impact our results
of operation and financial condition.

OUR RESULTS OF OPERATIONS  MAY BE  MATERIALLY  HARMED IF WE ARE UNABLE TO RECOUP
OUR INVESTMENT IN RESEARCH AND DEVELOPMENT.

The rapid change in technology in our industry requires that we continue to make
investments   in  research  and   development  in  order  to  not  only  develop
technologies  that  function  like the  OEMs' and do not  infringe  on the OEMs'
intellectual  property  rights,  but we must also  enhance the  performance  and
functionality  of our  products  and keep pace  with  competitive  products  and
satisfy customer demands for improved performance,  features,  functionality and
costs.  There can be no assurance that revenues from future  products or product
enhancements will be sufficient to recover the development costs associated with
such  products or  enhancements  or that we will be able to secure the financial
resources necessary to fund future  development.  Research and development costs
typically  are  incurred  before  we  confirm  the  technical   feasibility  and
commercial viability of a product, and not all development  activities result in
commercially viable products.  In addition, we cannot ensure that these products
or enhancements  will receive market  acceptance or that we will be able to sell
these  products  at prices  that are  favorable  to us.  Our  business  could be
seriously harmed if we are unable to sell our products at favorable prices or if
the market in which we operate does not accept our products.

OUR INTELLECTUAL PROPERTY PROTECTION IS LIMITED.

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:

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

WE DEPEND ON THE EFFORTS AND ABILITIES OF CERTAIN  SENIOR  MANAGEMENT  AND OTHER
KEY PERSONNEL 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 confidentiality agreements
with  executive  officers  and  certain  other  key  individuals,  we  have  few
employment agreements and they 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>
WE HAVE A SINGLE MANUFACTURING FACILITY AND WE MAY LOSE REVENUE AND BE UNABLE TO
MAINTAIN OUR CLIENT RELATIONSHIPS IF WE LOSE OUR PRODUCTION CAPACITY.

We manufacture all of the products we sell in our existing facility in Norcross,
Georgia.  If our existing production facility becomes incapable of manufacturing
products for any reason,  we may be unable to meet production  requirements,  we
may lose revenue and we may not be able to maintain our  relationships  with our
customers.  Without our  existing  production  facility,  we would have no other
means of manufacturing  products until we were able to restore the manufacturing
capability  at our facility or develop an  alternative  manufacturing  facility.
Although we carry  business  interruption  insurance  to cover lost  revenue and
profits in an amount we consider  adequate,  this  insurance  does not cover all
possible situations.  In addition, our business interruption insurance would not
compensate  us for the loss of  opportunity  and  potential  adverse  impact  on
relations  with our existing  customers  resulting from our inability to produce
products for them.

OUR ACQUISITION STRATEGY 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
businesses 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.

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.  During 2001 and 2003,  the United  States  launched  military
attacks on Afghanistan and Iraq. 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  and war, and any others which may occur
in the  future,  including  civil  disturbance,  war,  riot,  epidemics,  public
demonstration,  explosion, freight embargoes,  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.  In addition,  they could disrupt our ability
to obtain raw  materials  at  reasonable  prices,  this in turn could  adversely
affect our sales and profit  margins.  We are  unable to predict  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.

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.

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.

                                       18
<PAGE>
DUE TO  INHERENT  LIMITATIONS,  THERE  CAN BE NO  ASSURANCE  THAT OUR  SYSTEM OF
DISCLOSURE AND INTERNAL CONTROLS AND PROCEDURES WILL BE SUCCESSFUL IN PREVENTING
ALL ERRORS OR FRAUD,  OR IN MAKING ALL  MATERIAL  INFORMATION  KNOWN IN A TIMELY
MANNER TO THE APPROPRIATE MANAGEMENT.

Though we have concluded with reasonable  assurance that our books,  records and
accounts  are kept in  reasonable  detail,  accurately  and fairly  reflect  the
transactions and dispositions of assets,  transactions are recorded as necessary
to permit  preparation  of financial  statements  in accordance  with  generally
accepted accounting  principles,  receipts and expenditures and access to assets
is permitted in accordance  with  authorizations  of management and directors of
the  Company,  we do not have  internal  auditors and we depend on a small staff
with which it is sometimes  difficult to segregate certain duties or to document
our practices in policies and procedures. Further,  notwithstanding management's
conclusions,  the  effectiveness of a system of disclosure and internal controls
and procedures is subject to certain  inherent  limitations,  including cost and
staffing limitations,  judgments used in decision making,  assumptions regarding
the likelihood of future events,  soundness of internal  controls and fraud. Due
to such  inherent  limitations,  there can be no  assurance  that any  system of
disclosure or internal  controls and procedures will be successful in preventing
all errors or fraud,  or in making all  material  information  known in a timely
manner to the appropriate management.

RISKS RELATING TO OUR INDUSTRY:

WE OPERATE IN A COMPETITIVE AND RAPIDLY CHANGING MARKETPLACE.

There is significant  competition in the toner and consumable  imaging  products
industry in which we operate. In addition, the market for digital color printers
and copiers and related  consumable  products is subject to rapid change and the
OEM technologies are becoming  increasingly  difficult barriers to market entry.
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.

THE IMAGING SUPPLIES INDUSTRY IS COMPETITIVE AND WE ARE RELATIVELY SMALL IN SIZE
AND HAVE FEWER RESOURCES IN COMPARISON WITH MANY OF OUR COMPETITORS.

Our industry  includes large original  equipment  manufacturers  of printing and
photocopying  equipment  and the  related  imaging  supplies,  as well as  other
manufacturers and resellers of aftermarket  imaging  supplies,  with substantial
resources to support customers  worldwide.  Our future performance  depends,  in
part, upon our ability to continue to compete successfully worldwide. All of the
original  equipment   manufacturers  and  many  of  our  other  competitors  are
diversified  companies  with  greater  financial  resources  and more  extensive
research, engineering, manufacturing, marketing and customer service and support
capabilities  than we can provide.  We face  competition  from  companies  whose
strategy is to provide a broad array of products, some of which compete with the
products that we offer.  These competitors may bundle their products in a manner
that may discourage customers from purchasing our products. In addition, we face
competition  from smaller emerging imaging supply companies whose strategy is to
provide  a  portion  of the  products  and  services  that  we  offer.  Loss  of
competitive position could impair our prices, customer orders,  revenues,  gross
margins,  and market share, any of which would  negatively  affect our operating
results and financial condition.  Our failure to compete successfully with these
other companies  would  seriously harm our business.  There is risk that larger,
better-financed  competitors will develop and market more advanced products than
those that we currently offer or may be able to offer, or that  competitors with
greater  financial  resources  may  decrease  prices  thereby  putting  us under
financial pressure.  The occurrence of any of these events could have a negative
impact on our revenues.

OUR  PRODUCTS  HAVE  SHORT  LIFE  CYCLES  AND  ARE  SUBJECT  TO  FREQUENT  PRICE
REDUCTIONS.

Rapidly evolving and increasingly difficult  technologies,  frequent new product
introductions  and significant  price  competition  characterize  the markets in
which we operate. 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 and could cause our operating expenses to increase
substantially.

                                       19
<PAGE>
OUR  FINANCIAL  PERFORMANCE  DEPENDS  ON  OUR  ABILITY  TO  SUCCESSFULLY  MANAGE
INVENTORY LEVELS, WHICH IS AFFECTED BY FACTORS 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  often  depends on  factors  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.

RISKS RELATING TO OWNING OUR COMMON STOCK:

OUR OFFICERS AND DIRECTORS BENEFICIALLY OWN APPROXIMATELY 30% OF THE OUTSTANDING
SHARES OF COMMON STOCK, AND AN AFFILIATE OWNS 35% OF OUR COMMON STOCK,  ALLOWING
THESE STOCKHOLDERS TO CONTROL MATTERS REQUIRING APPROVAL OF THE STOCKHOLDERS.

As a  result  of such  ownership,  and  potential  increased  ownership,  by our
officers and directors,  other  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 April 21, 2004, we had issued and outstanding  12,713,005 shares of common
stock and  100,000  outstanding  warrants  and  970,000  outstanding  options to
purchase  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 we obtain additional equity capital.

WE MAY FACE POTENTIAL REGULATORY ACTION OR LIABILITY IN CONNECTION WITH OUR 2001
PRIVATE PLACEMENT.

Our  issuance  of common  stock and  warrants in a private  placement  which was
completed in 2001 could subject us to potential adverse consequences,  including
securities law liability and the voiding of contracts entered into in connection
with the private placement. If our activities or the activities of other parties
in the 2001 private placement are deemed to be inconsistent with securities laws
under Section 29 of the Securities Exchange Act of 1934 or our activities or the
activities or the activities of other parties are deemed to be inconsistent with
the broker dealer registration provisions of Section 15(a) of the Exchange Act:

     o    we may be able to void our obligation to pay transaction-related  fees
          in  connection   with  the  private   placement  and  we  may  receive
          reimbursement for fees already paid;
     o    persons with whom we have entered into  securities  transactions  that
          are  subject to these  transaction-related  fees may have the right to
          void these transactions; and
     o    we may be subject to regulatory action.

Due to the inherent uncertainties involved with the interpretation of securities
laws,  we are unable to predict the  following:  the  validity of any  potential
liability  in  connection  with  our  private  placement,  the  outcome  of  any
regulatory action or potential liability or the outcome of voiding  transactions
in connection with the private  placement.  The defense of any regulatory action
or litigation and any adverse  outcome could be costly and could have a material
adverse  effect on our financial  position and results of  operations  and could
divert management attention.

OUR COMMON STOCK IS LISTED ON THE  OVER-THE-COUNTER  (OTC) 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 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 limited
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.

                                       20
<PAGE>
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  stockholder  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.

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.

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,  to engage in sales of
our securities,  our intention to repay certain  borrowings from future sales of
our  securities  or cash  flow,  the  ability to expand  capacity  by placing in
service additional  manufacturing equipment and making use of that capacity, our
expected  acquisition of business or technologies,  our plans for broadening our
sales channels and the outlets for our products,  our expectation that shipments
to  international  customers will continue to account for a material  portion of
net sales, anticipated future revenues, our introduction of new products and our
increasing  our sales  from all in one  cartridges,  digital  copier,  color and
magnetic   character   recognition   toner  products  during  2004,  sales,  our
expectations for operations,  demand, technology,  products,  business ventures,
major  customers,  major  suppliers,  retention of key  officers,  management or
employees,  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  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.

                                       21
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

Market risk is the risk of loss to future earnings,  to fair values or to future
cash flows that may result from changes in the price of a financial  instrument.
The  value of a  financial  instrument  may  change as a result  of  changes  in
interest rates, exchange rates, commodity prices, equity prices and other market
changes.   Market  risk  is  attributed  to  all  market   sensitive   financial
instruments, including long-term debt.

We do not hold any investments or assets outside of the United States.  However,
we are exposed to financial market risks,  including changes in foreign currency
exchange rates and interest rates.

We estimate that about 80% of our transactions are denominated in U.S.  dollars,
excepting  those  sales in  Euros.  Accordingly,  beginning  in 2001,  we became
subject to foreign currency risk with respect to future costs or cash flows from
our sales in Euros.  We have  adjusted our prices  annually with our customer to
reflect  the  change in the  exchange  rate and do not  expect to be  subject to
material foreign currency risk,  accordingly,  with respect to those sales. As a
result,  to date, we have not entered into any foreign currency forward exchange
contracts  or other  derivative  financial  instruments  to hedge the effects of
adverse  fluctuations in foreign  currency  exchange.  We incurred a net foreign
currency  transaction gain of  approximately  $55,000 in the quarter ended March
31, 2004, and we incurred a net foreign  currency  transaction  gain of $149,000
and $2,858 in the years  ended  December  31, 2003 and 2002,  respectively.  Our
pricing for our  products  sold in Euros is  currently at the rate of 0.96 Euros
relative  to the U.S.  dollar.  A 10%  change  in the value of the Euro from .96
Euros relative to the United States dollar would cause  approximately  an $8,000
foreign  currency  translation  adjustment in an average  month, a type of other
comprehensive income (loss), which would be a direct adjustment to stockholders'
equity.

Our revolving  line of credit bears interest based on interest rates tied to the
prime  rate or LIBOR  rate,  either of which may  fluctuate  over time  based on
economic  conditions.  As a result, we are subject to market risk for changes in
interest  rates  and could be  subjected  to  increased  or  decreased  interest
payments if market rates  fluctuate and we are in a borrowing mode. At March 31,
2004, there were no amounts  outstanding under the line of credit agreement and,
accordingly,  a sustained  increase in the reference  rate of 1% would not cause
our annual interest expense to change.

Color Imaging's  investment policy requires investments with high credit quality
issuers and or over night repurchase agreements with our bank.  Investments made
by Color Imaging will  principally  consist of U.S.  government  and  government
agency  obligations  and  investment-grade,   interest-bearing   corporate  debt
securities  with varying  maturity dates of five years or less, or the overnight
purchase of securities held in our bank's investment  portfolio.  Because of the
credit criteria of Color Imaging's investment policies,  the primary market risk
associated with these  investments is interest rate risk. Color Imaging does not
use  derivative  financial  instruments  to  manage  interest  rate  risk  or to
speculate on future  changes in interest  rates.  Color Imaging had $1.1 million
invested in short-term securities available-for-sale through a fund at March 31,
2004, and we received  dividends of approximately  $11,000 while recording a net
asset value  decrease of  approximately  $1,100 for the quarter  ended March 31,
2004.

Management believes that a reasonable change in raw material prices could have a
material impact on future  earnings or cash flows,  because we generally are not
able to offset increases to our costs with higher prices for our products.

ITEM 4. CONTROLS AND PROCEDURES

a) On April 27, 2004, our Chief Executive  Officer and Chief  Financial  Officer
participated in a meeting during which there was an evaluation of our disclosure
controls and  procedures as of March 31, 2004.  Based on such  evaluation,  they
believe such controls and procedures are effective.

     The Company's  management,  including the Chief Executive Officer and Chief
Financial Officer, does not expect that its Disclosure Controls will prevent all
error  and all  fraud.  A  control  system,  no matter  how well  conceived  and
operated,  can  provide  only  reasonable,  not  absolute,  assurance  that  the
objectives  of the  control  system  are met.  Further,  the design of a control
system  must  reflect  the fact that  there are  resource  constraints,  and the
benefits of controls must be considered relative to their costs.  Because of the
inherent  limitations  in all control  system,  no  evaluation  of controls  can
provide  absolute  assurance that all control issues and instances of fraud,  if
any, within the Company have been detected.  These inherent  limitations include
the  realities  that  judgments  in  decision-making  can be  faulty,  and  that
breakdown can occur because of simple error or mistake. The design of any system
of controls also is based in part upon certain  assumptions about the likelihood
of future events,  and there can be no assurance that any design will succeed in
achieving its stated goals under all potential future conditions.

     Based  upon  the  Company's  Disclosure  Controls  evaluation,   the  Chief
Executive  Officer and Chief Financial  Officer have concluded that,  subject to
the limitations noted above, the Company's  Disclosure Controls are effective to
give reasonable  assurance that the information  required to be disclosed by the
Company in its periodic  reports is accumulated and  communicated to management,
including  the  Chief  Executive  Officer  and  Chief  Financial   Officer,   as
appropriate  to allow timely  decisions  regarding  disclosure  and is recorded,
processed,  summarized  and reported  within the time  periods  specified in the
Securities and Exchange Commission's rules and forms.

                                       22
<PAGE>

b) Our Chief  Executive  Officer and Chief  Financial  Officer  are  involved in
ongoing evaluations of internal controls.  On April 27, 2004, in anticipation of
the filing of this Form 10-Q,  they  reviewed  our  internal  controls  and have
determined,  based on such review,  that, there have been no significant changes
in our internal controls or in other factors that would significantly affect our
internal controls during the quarter ended March 31, 2004.



                                       23

<PAGE>
                                     PART II

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 2. CHANGES IN  SECURITIES,  USE OF PROCEEDS AND ISSUERS  PURCHASE OF EQUITY
        SECURITIES

On  January  23,  2003,  the  Company's  registration  statement  on Form  SB-2,
registering up to 7 million shares of the Company's  common stock,  was declared
effective (Registration Statement No. 333-76090), and the offering was commenced
by the  Company's  officers  and  directors.  On March  13,  2003,  the  Company
completed the public sale of 4,500,000 shares of the Company's common stock at a
price of $1.35 per share,  whereby  the  Company  received  $6,075,000  in gross
proceeds from an affiliate,  and the Company  terminated the offering before the
sale of all 7 million of  registered  shares.  The net proceeds  received by the
Company, after expenses of $174,416, was $5,900,584.  None of the aforementioned
expenses  were  direct  or  indirect  payments  to  directors,  officers,  their
associates or persons owning ten (10) percent or more of the common stock of the
Company.

On April 18, 2003,  the Company  established  a stock  repurchase  program under
which the  Company may  purchase on the open market the lesser of the  aggregate
value of $1,000,000 or 1,000,000  shares in compliance with Rule 10b-18,  and we
have reallocated proceeds for this program.

Our intended uses, as reallocated,  of the $6,075,000 of proceeds  received from
the public sale of our common stock,  and our uses through  March 31, 2004,  are
listed below in descending order of priority:

<TABLE>
<CAPTION>
    <S>                                               <C>             <C>             <C>              <C>
    Purpose:                                            Amount            Used        Reallocated       Remaining
    ------------------------------------------        -----------     ------------    ------------     -----------
    Accounts payable and other corporate
     and offering expenses . . . . . . . . . .        $ 1,000,000     $  (115,042)    $  (884,958)     $         0
    To retire debt (1) . . . . . . . . . . . .        $   350,000     $  (324,301)    $   (25,699)     $         0
    To retire debt (2) . . . . . . . . . . . .        $ 1,050,000     $  (956,883)    $   (93,117)     $         0
    To retire debt (3) . . . . . . . . . . . .        $         0     $  (235,000)    $   235,000      $         0
    To acquire capital assets. . . . . . . . .        $ 1,500,000     $  (318,774)    $         0      $ 1,181,226
    To repurchase our stock (4)                       $         0     $   (41,940)    $ 1,000,000      $   958,060
    For other general corporate purposes
     including working capital . . . . . . . .        $ 2,175,000     $(1,445,000)    $  (231,226)     $   498,774
                                                      -----------     ------------                     -----------
                                              Total:  $ 6,075,000     $(3,436,940)                     $ 2,638,060

    Pending application:
    -------------------
    Short-term investments . . . . . . . . . .                                                         $ 1,138,060
    Pay down of revolving line of credit . . .                                                         $ 1,500,000
    ----------------
</TABLE>

(1)  On November  30, 2000,  we entered  into a loan for $500,000  with a 5-year
     term, secured by specific  manufacturing  equipment,  maturing November 30,
     2004, with General Electric  Capital  Corporation for the purchase of toner
     manufacturing  equipment.  The  interest  rate is 10.214%  and the  monthly
     principal and interest payments were $10,676.39.
(2)  On June 24, 1999, we entered into a loan for $1,752,000 with a 7-year term,
     secured by our business  assets,  maturing June 24, 2006,  with  SouthTrust
     Bank for the refinancing of obligations  owing the bank for the acquisition
     of equipment and that due under a previous  working capital line of credit.
     The interest rate is 7.90% per annum and the monthly principal and interest
     payments were $27,205.00.
(3)  On July 24, 1999, as amended, we entered into a borrowing arrangement under
     a revolving  line of credit in the maximum  amount of $2.5 million.  During
     March 2003 we temporarily  used  $1,735,000 of our proceeds from our public
     offering  on Form SB-2 to pay down the line of credit to $0,  which at that
     time had an interest  rate of  3.8375%.  On June 16,  2003,  we renewed and
     restructured  the  line of  credit  with the  bank,  reducing  the  maximum
     availability to $1.5 million and permanently retiring $235,000.
(4)  From July 2003 through  March 31, 2004,  under the  repurchase  program the
     Company  has  repurchased  62,000  shares of our  common  stock on the open
     market  at an  average  price of  $0.678.  Approximately  $958,000  remains
     available for future common stock repurchases.

During March 2003,  using  proceeds from the offering on Form SB-2,  the Company
retired debt owed to General Electric  Capital  Corporation and SouthTrust Bank,
and to the extent  proceeds were not required in the amounts  outlined for those
purposes, they have been reallocated to be used for general corporate purposes.

During March 2003, pending application of the proceeds from the offering on Form
SB-2,  the  Company  paid  down  its  line of  credit  with the bank by the then
outstanding principal balance of $1,735,000.  On June 16, 2003, with the renewal
of our line of credit with SouthTrust Bank, we permanently reduced our revolving
line of credit to $1,500,000; and, as a result, we retired $235,000 of that debt
with our bank.

                                       24
<PAGE>
Pending  application,  we have  retained  the  balance of the net  proceeds in a
deposit  account with the bank and an investment  account with a securities firm
related to the bank.

No direct or indirect  payments to  directors,  officers,  their  associates  or
persons owing ten (10) percent or more of the  Company's  common stock were made
with proceeds from the Company's offering on Form SB-2

ISSUER PRIVATE PURCHASES OF EQUITY SECURITIES

There were no private  purchases by the Company of its equity  securities during
the quarter ended March 31, 2004.

ISSUER MARKET PURCHASES OF EQUITY SECURITIES

On April 18, 2003,  the Company  established  a stock  repurchase  program under
which the  Company may  purchase on the open market the lesser of the  aggregate
value of  $1,000,000 or 1,000,000  shares in  compliance  with Rule 10b-18 until
September 30, 2004, and we have reallocated proceeds for this program. From July
2003  through  March 31,  2004,  under the  repurchase  program  the Company has
repurchased  62,000  shares of our common stock on the open market at an average
price of $0.68. Approximately $958,000 remains available for future common stock
repurchases.

<TABLE>
<CAPTION>
<S>                   <C>              <C>            <C>                  <C>
--------------------------------------------------------------------------------------------------
                          ISSUER (MARKET) PURCHASE OF EQUITY SECURITIES
--------------------------------------------------------------------------------------------------
                                                                           Maximum Number
                                                      Total Number of      (or Approximate
                                                      Shares Purchased     Dollar Value) of
                      Total Number     Average Price  as Part of Publicly  Shares that May Be
                        of Shares        Paid per     Publicly  Announced  Purchased Under the
    Period              Purchased       Share ($)     Plans or Programs    Plans or Programs
-------------------- ---------------- --------------- -------------------- -----------------------
During 2003                   44,500       0.65                  44,500

During 2004
--------------------
January                        7,000       0.72                   7,000
February                       3,500       0.76                   3,500
March                          7,000       0.77                   7,000
                     ---------------- --------------- -------------------- -----------------------
Total 2004                    17,500       0.75                  44,500             1,000,000
                     ---------------- --------------- -------------------- -----------------------
Total                         62,000       0.68                  62,000             1,000,000

</TABLE>

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

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

None

ITEM 5. OTHER INFORMATION

None

                                       25
<PAGE>
ITEM 6 -EXHIBITS AND REPORTS ON FORM 8-K

(a)  EXHIBITS

Exhibit
   No.         Description
---------      --------------
2.1            Merger Agreement and Plan of  Reorganization  dated May 16, 2000,
               by  and  between  Advatex   Associates,   Inc.,  Logical  Imaging
               Solutions  Acquisition  Corp.,  Color Imaging  Acquisition Corp.,
               Logical  Imaging   Solutions,   Inc.,  and  Color  Image,   Inc.,
               incorporated by reference to the  Registrant's  Form 8-K filed on
               July 17, 2000.
2.2            Amendment   No.   1  to  the   Merger   Agreement   and  Plan  of
               Reorganization dated June 15, 2000,  incorporated by reference to
               the Registrant's Form 8-K filed on July 17, 2000.
2.3            Amendment   No.   2  to  the   Merger   Agreement   and  Plan  of
               Reorganization dated June 26, 2000,  incorporated by reference to
               the Registrant's Form 8-K filed on July 17, 2000.
2.4(1)         Share Exchange  Agreement  dated as of September 11, 2002 between
               Color Imaging,  Inc.,  Logical Imaging  Solutions,  Inc., Digital
               Color Print,  Inc., and the  shareholders of Digital Color Print,
               Inc.,   incorporated   by   reference   to  Exhibit  2.1  to  the
               Registrant's Form 8-K filed September 26, 2002.
2.5            Amendment No. 1 to Share Exchange Agreement dated as of September
               20, 2002 between Color Imaging,  Inc., Logical Imaging Solutions,
               Inc.,  Digital Color Print, Inc., and the shareholders of Digital
               Color Print,  Inc.,  incorporated  by reference to Exhibit 2.2 to
               the Registrant's Form 8-K filed September 26, 2002.
3.1            Certificate  of  Incorporation,   incorporated  by  reference  to
               Exhibit 3.1 to the Registration statement on Form SB-2 filed July
               15, 2002.
3.2            Bylaws, incorporated by reference to the Registrant's Form 10-QSB
               for  the  quarter  ended  March  31,  2002.  4.1  Stock  Purchase
               Agreement  between the Company and Wall Street  Consulting  Corp.
               dated October 30, 2001,  incorporated by reference to Exhibit 4.1
               to the Registration statement on Form SB-2 filed May 31, 2002.
4.2            Promissory Note of Wall Street Consulting Corp. dated October 30,
               2001,   incorporated   by   reference   to  Exhibit  4.2  to  the
               Registration statement on Form SB-2 filed May 31, 2002.
4.3            Form of Warrant issued to Selling  Stockholders,  incorporated by
               reference  to Exhibit 4.3 to the  Registration  statement on Form
               SB-2 filed November 28, 2001.
4.4            Development  Authority  of Gwinnett  County,  Georgia  Industrial
               Development  Trust Indenture dated June 1, 1999,  incorporated by
               reference to Exhibit 4.27 to the  Registration  statement on Form
               SB-2 filed May 31, 2002.
4.5            Loan  Agreement  between the Company,  Kings Brothers LLC and the
               Development  Authority of Gwinnett County,  Georgia dated June 1,
               1999,   incorporated   by   reference  to  Exhibit  4.28  to  the
               Registration statement on Form SB-2 filed May 31, 2002.
4.6            Joint  Debtor  Agreement  dated June 28,  2000 by and among Color
               Image, Inc., Kings Brothers, LLC, Dr. Sueling Wang, Jui-Chi Wang,
               Jui-Kung Wang, and Jui-Hung  Wang,  incorporated  by reference to
               Exhibit  4.28 to the  Registration  statement  on Form SB-2 filed
               February 11, 2002.
4.7            First  Amendment to Joint Debtor  Agreement dated January 1, 2001
               by and among Color  Imaging,  Kings  Brothers,  LLC, Dr.  Sueling
               Wang,   Jui-Chi  Wang,   Jui-Kung   Wang,   and  Jui-Hung   Wang,
               incorporated  by reference  to Exhibit  4.29 to the  Registration
               statement on Form SB-2 filed February 11, 2002.
4.8            $500,000  Promissory  Note between Color Imaging and Sueling Wang
               dated March 14, 2002,  incorporated  by reference to Exhibit 4.34
               to the Registration statement on Form SB-2 filed April 11, 2002.
4.9            $500,000  Promissory Note between Color Imaging and Jui Hung Wang
               dated August 21, 2002,  incorporated by reference to Exhibit 4.50
               to the Registration statement on Form SB-2 filed October 2, 2002.
4.10           $100,000  Promissory  Note between Color Imaging and Jui Chi Wang
               dated August 21, 2002,  incorporated by reference to Exhibit 4.51
               to the Registration statement on Form SB-2 filed October 2, 2002.
4.11           First Note Modification  Agreement between Sueling Wang and Color
               Imaging  dated  August 27,  2002,  incorporated  by  reference to
               Exhibit  4.52 to the  Registration  statement  on Form SB-2 filed
               October 2, 2002.
4.12           Amended and restated  $1,500,000  revolving  note  between  Color
               Imaging and SouthTrust Bank dated June 16, 2003,  incorporated by
               reference to Exhibit 4.12 to the  Registrant's  Form 10-Q for the
               quarter ended June 30, 2003.
4.13           Amended and restated  loan and security  agreement  between Color
               Imaging and SouthTrust Bank dated June 16, 2003,  incorporated by
               reference to Exhibit 4.13 to the  Registrant's  Form 10-Q for the
               quarter ended June 30, 2003.

<PAGE>
Exhibit
   No.         Description
---------      ------------
10.1+*         Employment  Agreement between Color Imaging and Patrick J. Wilson
               dated April 1, 2004.
10.2+*         Amendment  to  Employment  Agreement  between  Color  Imaging and
               Morris E. Van Asperen dated April 23, 2004.
31.1+          Chief executive officer's  certification  pursuant to Section 302
               of the Sarbanes-Oxley Act of 2002
31.2+          Chief financial officer's  certification  pursuant to Section 302
               of the Sarbanes-Oxley Act of 2002
32.1+          Chief executive officer's  certification  pursuant to Section 906
               of  the   Sarbanes-Oxley  Act  of  2002.
32.2+          Chief financial officer's  certification  pursuant to Section 906
               of the  Sarbanes-Oxley  Act of 2002.

------------------------
+ Filed herewith.
* Management contract or compensatory arrangement or plan.
(1) Pursuant to Rule  601(b)(2),  the schedules  and exhibits to this  Agreement
shall not be filed.  A list of the  schedules  and  exhibits is contained on the
last page of the Agreement.  The Registrant  agrees to furnish  supplementally a
copy of any of the omitted schedules and exhibits to the Securities and Exchange
Commission upon request.


(b)  REPORTS ON FORM 8-K

None.


                                       27

<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/ JUI-KUNG WANG
                                       --------------------------------------
April 27, 2004                         Jui-Kung Wang
                                       Chief Executive Officer





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



                                       28

1759945