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, 2005

[ ] 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 20, 2005, there were12,690,305 shares of Common Stock outstanding.



<PAGE>


                              COLOR IMAGING, INC.
                         QUARTERLY REPORT ON FORM 10-Q
                 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2005



                                     INDEX



PART I: FINANCIAL INFORMATION

Item 1. Financial Statements

        Condensed Balance Sheets at March 31, 2005
          (Unaudited) and December 31, 2004(Audited)...........................3
        Condensed Statements of Operations (Unaudited)
          for the Three Months ended March 31, 2005 and 2004...................4
        Condensed Statements of Cash Flows (Unaudited)
          for the Three Months ended March 31, 2005 and 2004...................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......26
Item 4. Controls  and Procedures ......................................... ...27



PART II: OTHER INFORMATION

Item 1. Legal Proceedings  ...................................................28
Item 2. Unregistered sales of equity securities
          and use of proceeds.................................................28
Item 3. Defaults Upon  Senior Securities......................................30
Item 4. Submission of Matters to a Vote of Security Holders...................30
Item 5. Other information ....................................................30
Item 6. Exhibits..............................................................31
Signatures....................................................................33
Exhibits


                                       2
<PAGE>




                         PART I: FINANCIAL INFORMATION

ITEM 1 -FINANCIAL STATEMENTS

                              COLOR IMAGING, INC.
                            CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
<S>                                                                       <C>                        <C>

                                                                               31-Mar-05                31-Dec-04
                                                                              (Unaudited)               (Audited)
                                                                           ---------------           ---------------
                                 - ASSETS -
CURRENT ASSETS:
        Cash                                                                $  1,918,745              $  2,044,989
        Accounts receivable - net of allowance for doubtful accounts
          of $93,965 and $93,201 for 2005 and 2004, respectively               2,780,078                 2,412,354
        Inventories                                                            5,331,472                 4,854,939
        Related party portion of IDR bond - current                                   --                    92,664
        Other current assets                                                     106,427                   106,618
                                                                           ---------------           ---------------
                            TOTAL CURRENT ASSETS                              10,136,722                 9,511,564
                                                                           ---------------           ---------------

PROPERTY, PLANT AND EQUIPMENT - NET                                            6,645,942                 6,601,832
                                                                           ---------------           ---------------
OTHER ASSETS:
       Related party portion of IDR bond                                              --                   554,764
       Deferred expense re: potential transactions                                33,936                       --
       Other assets                                                               23,871                    27,864
                                                                           ---------------           ---------------
                                                                                  57,807                   582,628
                                                                           ---------------           ---------------
                                                                            $ 16,840,471              $ 16,696,024
                                                                           ===============           ===============
                     - LIABILITIES & STOCKHOLDERS' EQUITY -

CURRENT LIABILITIES:
       Revolving credit lines                                               $         --              $         --
       Accounts payable                                                        2,145,547                 1,625,282
       Current portion of notes payable                                            6,192                     6,071
       Current portion of notes payable - related parties                             --                    67,816
       Current portion of bonds payable                                               --                   390,000
       Other current liabilities                                                  28,130                     7,500
                                                                           ---------------           ---------------
                            TOTAL CURRENT LIABILITIES                          2,179,869                 2,096,669
                                                                           ---------------           ---------------
LONG TERM LIABILITIES:
       Notes payable                                                               3,844                     5,438
       Bonds payable                                                           2,075,000                 2,335,000
       Deferred tax liability                                                    704,250                   602,450
                                                                           ---------------           ---------------

                           TOTAL LONG TERM LIABILITIES                         2,783,094                 2,942,888
                                                                           ---------------           ---------------

TOTAL LIABILITIES                                                              4,962,963                 5,039,557
                                                                           ---------------           ---------------
COMMITMENTS & CONTINGENCIES

STOCKHOLDERS' EQUITY:
       Common stock, $.01 par value, authorized 20,000,000 shares;
         12,690,305 shares issued and outstanding at 2005 and 2004               126,903                   126,903
       Additional paid-in capital                                             12,681,472                12,681,472
       Accumulated deficit                                                      (930,867)               (1,151,908)
                                                                           ---------------           ---------------
                                                                              11,877,508                11,656,467
                                                                           ---------------           ---------------
                                                                            $ 16,840,471              $ 16,696,024
                                                                           ===============           ===============
</TABLE>



See notes to consolidated financial statements.



                                       3
<PAGE>



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


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

                                                    THREE MONTHS ENDED MARCH 31,
                                                  -------------------------------
                                                      2005               2004
                                                  ------------      -------------
SALES                                             $ 5,628,987       $ 5,601,217
C0ST OF SALES                                       3,832,067         4,195,184
                                                  ------------      -------------
GROSS PROFIT                                        1,796,920         1,406,033
                                                  ------------      -------------
OPERATING EXPENSES
    Administrative                                     436,605           396,668
    Research & development                             293,897           310,176
    Sales & marketing                                  761,248           598,084
                                                   ------------      ------------
                                                     1,491,750         1,304,928
                                                   ------------      ------------
INCOME FROM OPERATIONS                                 305,170           101,105
                                                   ------------      ------------

OTHER INCOME  (EXPENSE)
    Other income                                        41,848            93,580
    Financing expenses                                 (24,177)          (23,955)
                                                   ------------      ------------
                                                        17,671            69,625
                                                   ------------      ------------

INCOME BEFORE PROVISION FOR INCOME TAXES               322,841           170,730
PROVISION FOR INCOME TAXES                             101,800            68,200
                                                   ------------      ------------
NET INCOME                                         $   221,041       $   102,530
                                                   ============      ============

     INCOME PER COMMON SHARE
        Basic                                      $       .02       $       .01
        Diluted                                    $       .02       $       .01
                                                   ============      ============

     WEIGHTED AVERAGE SHARES OUTSTANDING
       Basic                                        12,690,305        12,730,505
       Assumed conversion                                2,128            17,857
                                                   ------------      ------------
       Diluted                                      12,692,433        12,748,362
                                                  ============       ============
</TABLE>


See accompanying notes
                                       4
<PAGE>




                              COLOR IMAGING, INC.
                       CONDENSED STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)


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

                                                            THREE MONTHS ENDED MARCH 31,
                                                            ----------------------------
                                                                2005            2004
                                                            ------------    ------------
Cash flows from operating activities:
  Net income                                                $   221,041     $   102,530
  Adjustments to reconcile net income to net cash
    provided by (used in) operating activities:
        Depreciation and amortization                           152,552         148,404
        Deferred income taxes                                   121,800          66,950
    Decrease (increase) in:
        Accounts receivable and other receivables              (367,724)       (469,617)
        Inventories                                            (476,533)        (32,343)
        Prepaid expenses and other assets                       651,612         305,320
    Increase (decrease) in:
        Accounts payable and accrued liabilities                540,895        (527,299)
                                                            ------------    ------------
        Net cash provided by (used in) operations               823,643        (406,055)
                                                            ------------    ------------

Cash flows (used in) investing activities:
     Capital expenditures                                      (196,662)       (125,338)
     Other asset re: potential transaction                      (10,364)             --
                                                            ------------    ------------
        Net cash (used in) investing activities                (207,026)       (125,338)
                                                            ------------    ------------
Cash flows from financing activities:
  Repurchase of common shares and warrants                           --         (13,105)
  Net (payments) under related party borrowings                 (67,816)        (97,315)
  Net (payments) under IDR Bond                                (650,000)             --
  Principal payments of long-term debt                           (1,473)         (1,361)
  Deferred costs re: potential transaction                      (23,572)             --

                                                            ------------    ------------
        Net cash (used in) financing activities                (742,861)       (111,781)
                                                            ------------    ------------
        Net (decrease) in cash                                 (126,244)       (643,174)

Cash at beginning of year                                     2,044,989       2,213,830
                                                            ------------    ------------
Cash at end of period                                       $ 1,918,745     $ 1,570,656
                                                            ============    ============

Supplemental disclosure of cash flow Information:

         Cash paid during the period for:
         Interest and financing expense                     $    20,633     $    20,411
                                                            ============    ============
         Income taxes                                       $         0     $         0
                                                            ============    ============
</TABLE>


See accompanying notes

                                       5
<PAGE>



                               COLOR IMAGING, INC.
                 NOTES TO INTERIM CONDENSED FINANCIAL STATEMENTS
                                 March 31, 2005
                                   (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, 2005 are not
necessarily  indicative  of the results  that may be expected for the year ended
December 31, 2005

NOTE 2. COMMON STOCK AND EQUIVALENTS

In  accordance  with the  provisions of SFAS No. 148, the Company has elected to
continue  applying the intrinsic  value  approach under APB No. 25 in accounting
for its  stock-based  compensation  plans.  Accordingly,  the  Company  does not
recognize  compensation expense for stock options when the exercise price at the
grant date is equal to or  greater  than the fair  market  value of the stock at
that date. The Company generally  recognizes  compensation  expense only when it
grants  options with a discounted  exercise  price,  at which time any resulting
compensation  expense is recognized  ratably over the associated service period,
which is generally the option vesting term.

During the three months ended March 31, 2005 and 2004, the Company did not grant
any options to employees and on March 31, 2005 options granted to an employee to
purchase  10,000  shares of the Company's  common stock at an exercise  price of
$.54 per share lapsed. The fair value of option granted is estimated on the date
of the grant using the Black-Scholes  option-pricing  model. For purposes of pro
forma disclosures, the estimated fair value of the options is amortized over the
average vesting period of the options.

The  following  table  illustrates  the  effect on net income and net income per
share as if the fair value based method had been applied to all  outstanding and
vested awards in each period:

                                                   THREE MONTHS MARCH 31,
                                                ----------------------------
                                                    2005            2004
                                                ------------    ------------
Net income, as reported                         $  251,041       $  102,530
Less: Pro forma stock based
      compensation expense - net of tax             20,846           24,766
                                                ------------    ------------
Pro forma net income                            $  230,195       $   77,764
                                                ============    ============
Basic Earnings per share:
    As reported                                     $ 0.02           $ 0.01
    Pro forma                                       $ 0.02           $ 0.01

Diluted Earnings per share:
    As reported                                     $ 0.02           $ 0.01
    Pro forma                                       $ 0.02           $ 0.01

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, 2005:

<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           1,410,000           $1.59             3.29 years         1,037,500          $1.89
Warrants $2.00                  100,000           $2.00             0.28 years           100,000          $2.00
                                            ----------------   -------------------     ---------    ----------------
Options and warrants          1,510,000           $1.62             3.09 years         1,137,500          $1.90
                                            ================                                        ================
</TABLE>

                                       6
<PAGE>


NOTE 3. INVENTORIES

Inventories  consisted  of the  following  components  as of March 31,  2005 and
December 31, 2004:



                                   March 31, 2005    December 31, 2004
                                  ----------------   -----------------
Raw materials                       $  1,309,732        $    945,311
Work-in-process                        1,776,835           1,464,875
Finished goods                         2,373,632           2,526,370
Obsolescence allowance                  (128,727)            (81,617)
                                  ----------------   -----------------
     Total                         $   5,331,472        $  4,854,939
                                  ================   =================

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,  2005  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,  2005,  the  interest  rate was the
one-month Libor rate of 2.86% plus 2.50% (5.36%).  This revolving line of credit
has a June 30, 2005 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.  On  January  5,  2005,  the
irrevocable  standby  letter of credit was amended and reduced by $500,000 to $1
million.  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, 2005,
the Company was in compliance with these covenants.

NOTE 5. SIGNIFICANT CUSTOMERS

In the three month period ended March 31, 2005,  one customer  accounted for 16%
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, 2005, was $287,700.

NOTE 6. SIGNIFICANT SUPPLIERS

In the three months ended March 31, 2005,  the Company  purchased 28% and 23% of
its raw materials,  components and supplies from two foreign  suppliers with the
former 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. On
January 5, 2005,  the  irrevocable  standby  letter of credit  was  amended  and
reduced by $500,000 to $1 million.  At March 31, 2005, accounts payable to these
suppliers were $653,352 and $438,152, 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:

                                            2005        %         2004        %
                                        ------------  ----    ------------  ----
Sales to Unaffiliated Customers:
United States                           $ 2,632,341    47%    $ 3,182,361    57%
Europe                                    1,900,150    34%      1,222,352    22%
Mexico                                      592,967    10%        808,546    14%
Asia                                        260,450     5%        260,518     5%
All Others                                  243,079     4%        127,440     2%
                                        ------------          ------------
Total                                   $ 5,628,987   100%    $ 5,601,217   100%
                                        ============          ============

                                       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, 2005, were $139,587.

(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 2.27% revenue bonds, 3.27% inclusive of the
1% letter of credit fee,  as of March 31,  2005,  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.  On March 8, 2005, Kings Brothers,  LLC prepaid
the then  outstanding  principal  balance  attributable  to it in the  amount of
$647,460,  and per the  amendment to the Joint Debtor  Agreement as of that date
between the Company and Kings  Brothers the  prepayment was first applied to the
principal  due under the bond in the amount of $390,000  on July 1, 2005.  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. As of March 31, 2005,
the bond  principal  outstanding  was  $2,075,000 and the portion due from Kings
Brothers, LLC was $0.

(C) PURCHASES:

The Company  purchased  from an  affiliate  for the three months ended March 31,
2005, $961,012 of all in one imaging cartridges, injection molded cartridges and
bottles for copiers and laser  printers.  Accounts  payable to the  affiliate at
March 31, 2005, was $653,352. 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
expenses  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.  Effective April 1, 2004, the parties agreed to amend the Marketing and
Licensing  Agreement  to reduce the costs of the  product to the  Company and to
include a royalty  payment  by the  Company  to the  affiliate  based on the net
profit realized upon the sale of the products,  after certain marketing expenses
of the Company. Royalty payments for the three months ended March 31, 2005, were
$26,558.

(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 was 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,  decrease  the  interest  rate to 6% per annum and provide 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, 2005 was $15,000 and $149, respectively.  As of March 31, 2005 the principal
outstanding was $0.

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,
matured on March 1, 2005 and was 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, 2005 was $8,803 and
$65, respectively. As of March 31, 2005 the principal outstanding was $0.

                                       8
<PAGE>


NOTE 8. RELATED PARTY TRANSACTIONS (CONTINUED):

(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,  matured on March 1, 2005 and was
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, 2005 was $44,013 and $326, respectively. As of March 31,
2005 the principal outstanding was $0.

(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, 2005, Company directors Jui-Hung Wang, Jui-Chi Wang and Jui-Kung
Wang each owned 8.0%, 8.4% and 1.8%, respectively, of General Plastic Industrial
Co., Ltd.

NOTE 9.  SUBSEQUENT EVENT

On April 14, 2005,  Company's Board of Directors approved a reverse split of the
Company's  common  stock,  with cash  payments  for  fractional  shares  held by
stockholders  with less than one whole share,  to be followed  immediately  by a
forward  split at the same  ratio to  effect a going  private  transaction.  The
Company has had less than 300 stockholders of record since last year, and if the
transaction is approved by the Company's stockholders at its next annual meeting
and  implemented,  it would  enable the  Company to  voluntarily  terminate  the
registration  of its Common Stock under the Securities  Exchange Act of 1934 and
go  private.  The  going  private  transaction  is  subject  to  conditions  and
uncertainties,  including  stockholder  approval,  the Board's  determination to
proceed  with the reverse  stock  split,  the  conditions  of the consent of the
Company's  lender and the Company's  ability to fund the payment for  fractional
shares. .

                                       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

Color Imaging,  formerly known as Advatex Associates,  Inc., was incorporated in
Delaware in 1987. On May 16, 2000,  Advatex,  Logical  Acquisition  Corp., Color
Acquisition Corp., Logical Imaging Solutions, Inc. and Color Image, Inc. entered
into a Merger Agreement and Plan of Reorganization pursuant to which on June 28,
2000,  Logical  Acquisition Corp. merged with and into Logical Imaging Solutions
and Color Acquisition  Corp.  merged with and into Color Image.  Pursuant to the
Merger  Agreement,  stockholders  of Logical  Imaging  Solutions and Color Image
exchanged  their shares for shares of common stock of Advatex.  Logical  Imaging
Solutions  stockholders  converted  their  shares into shares of common stock of
Advatex at the ratio of 1.84843  shares of common  stock of Advatex for each one
share of Logical Imaging  Solutions.  Color Image  stockholders  converted their
shares  into  shares of  common  stock of  Advatex  at the ratio of 15 shares of
common  stock of  Advatex  for each one  share  of Color  Image.  Following  the
conversion of shares by Logical Imaging Solutions and Color Image  stockholders,
stockholders  of Logical Imaging  Solutions and Color Image owned  approximately
85% of the  outstanding  shares of common stock of Advatex and  stockholders  of
Advatex before the merger owned  approximately 15% and Logical Imaging Solutions
and Color Image became wholly-owned  subsidiaries of Advatex. The purpose of the
merger  was  to  combine  Color  Image's  toner  and  consumable  expertise  and
manufacturing  plant with Logical Imaging  Solutions'  advanced  printing system
capabilities  to offer a wider  product  range and  ensure  product  supply  for
Logical Imaging  Solutions'  Solution Series printing  systems.  Management also
anticipated  that the merger with a company  that was subject to the  Securities
Exchange Act of 1934 would also permit the reorganized  business to offer shares
to other acquisition candidates, in lieu of cash.

On July 7, 2000, pursuant to a vote of our stockholders,  we changed our name to
Color Imaging,  Inc. On December 31, 2000, Color Image, Inc. was merged with and
into Color  Imaging.  On September  11, 2002,  we entered into a share  exchange
agreement with Digital Color Print, Inc. and four of our directors to divest our
wholly owned subsidiary,  Logical Imaging Solutions, Inc. On September 30, 2002,
the share exchange  transaction was completed and Color Imaging  disposed of its
wholly-owned  subsidiary,  Logical  Imaging  Solutions,  Inc., in a common stock
share  exchange  with Digital Color Print,  Inc.,  which is owned by four former
directors 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.
Since its  founding  in 1993,  Logical  Imaging  Solutions,  Inc.'s  development
efforts have focused on creating a high-speed  digital  variable  data  printing
system for commercial printing applications that combines software, hardware and
consumable  products  not only for  black  text for image  printing  but also in
color. 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 digital and analog photocopiers, laser printers and facsimile machines.
Color Imaging's  toners permit the  photocopying and 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 and imaging drums.

Color  Imaging  has  continually  expanded  its product  line and  manufacturing
capabilities.  This  expansion  has led to the creation  and  marketing of 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),   Fuji-Xerox(TM),   Hewlett
Packard(TM),  Lexmark(TM),  Kyocera(TM), Minolta(TM), Okidata(TM). Color Imaging
also  manufactures  and/or markets  toners for use in Canon(TM),  Gestetner(TM),
Kyocera/Mita(TM),  Konica(TM),  Lanier(TM),  Minolta(TM),  Ricoh(TM), Savin(TM),
Sharp(TM),  Toshiba(TM),  Xerox(TM)  copiers.  Color Imaging also offers product
enhancements,  including imaging supplies that enable standard laser printers to
print  magnetic  character  recognition  data.  Color  Imaging  markets  branded
products  directly  to  original  equipment   manufacturers   ("OEMs")  and  its
aftermarket  products  worldwide to distributors and  re-manufacturers  of laser
printer toner cartridges and to 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) increasing  international  sales and (6)
increasing our copier distributor and dealer customer base.

                                       10
<PAGE>


RECENT DEVELOPMENTS

Business Color Products

Business  color  (meaning  copiers or printers with a separate  "black" color as
well as the three primary colors of red, blue and yellow) continues to grow with
more  and more OEM  machine  introductions,  especially  in the  higher  copy or
printing speeds where full finishing is needed. We have grown our business color
finished  product net sales from  approximately  10% of our sales in 2004 to 29%
for the  quarter  ended  March 31,  2005,  and we expect  our sales  from  color
finished  products to continue to  increase.  The effect of these sales  already
reflect in our improving gross and operating profit margins, and we expect these
margins for year 2005 to surpass those of 2004.

A large  portion of the business  color copier market has been captured by Ricoh
with their B to C machine  placements.  B to C means ... black to color enabled.
Ricoh is also  expanding  its color  printer  only  market with many new machine
introductions.  New introductions will be the Ricoh 3000 and 4000 printers which
will be added to their current 5000, 7000 and 7100 printer line. Ricoh's intent,
we believe, is to upgrade their entire machine population to these new versions.

We believe cost per color copy is the key to higher volumes of full color copies
in the workplace, and now:

o    we plan to continue to introduce color toner cartridges for selected,  new,
     high volume business color machines,
o    we have a full line of business  color  toners for the Ricoh family of copy
     machines, and
o    we are prepared to support the entire Ricoh color offering, including their
     new printers.

In the  quarter  ended  March 31,  2005,  we  introduced  color  toners  for the
Konica/Minolta family of business color copiers. Similar copier engines are used
in Konica,  Minolta,  Kyocera/Mita and Imagistics machines.  We have a cartridge
that  is   universal,   meaning  it  fits  across  this  entire   product  line.
Additionally, we introduced separate color cartridges for the new C-350 "bizhub"
machine  which has been  received  very well in the  marketplace.  New  products
coming for this family are the Konica  8050  engine and the new C-500  "bizhub."
Here,  again, we intend to provide a complete  offering of color  cartridges for
these product lines.

During the second quarter of 2005, we plan to introduce  color toner  cartridges
for the OKI printer line of  5100/7200/9300  printers.  OKI has been  successful
placing this desktop  printer and our new universal  cartridges will fit many of
these new printers. Also during the second quarter we to plan to introduce color
products for the Sharp and Toshiba business color machines.

We next plan to expand  our  business  color  toner  cartridge  product  line by
offering the Canon line of "Business  Color"  cartridges with the first products
to be introduced planned to be Canon C3100 and C3200 color products.

With the rapid introduction of new color  multifunctional  printers ("MFP's") by
the OEMs and the users' and  dealers'concern  about cost per copy and keeping it
down,  we are  positioning  ourselves  to be the leading  provider of lower cost
aftermarket supplies for these successful business color OEM offerings.

All in one imaging, toner and drum cartridges

We introduced  during 2003 the  all-in-one  imaging,  toner and drum  cartridges
manufactured by our foreign affiliate. Through March 31, 2005, the Company's net
sales for 100% new all-in-one products were:
<TABLE>
<CAPTION>
<S>             <C>             <C>              <C>             <C>               <C>

   Year         1st Quarter      2nd Quarter     3rd Quarter      4th Quarter          TOTAL
-----------     -----------      -----------     -----------      -----------       -----------
   2005          $ 621,817           N/A              N/A             N/A           $   621,817

   2004          $ 158,311        $ 657,771       $ 919,197        $ 772,064        $ 2,507,343

   2003          $      --        $     --        $  64,414        $  64,457        $   128,871
</TABLE>

As of March 31, 3005, the backlog of the Company for these products was $64,367.

Board approved the Company's "going private"

On April 14, 2005, the Company's Board of Directors  approved a reverse split of
Color Imaging's common stock,  with cash payments for fractional  shares held by
stockholders  with less than one whole share,  to be followed  immediately  by a
forward  split at the same ratio to effect a going  private  transaction.  Color
Imaging has had less than 300 stockholders of record since last year, and if the
transaction  is  approved  by Color  Imaging's  stockholders  at its next annual
meeting  and  implemented,   Color  Imaging  expects  to  have  fewer  than  150
stockholders of record, enabling it to voluntarily terminate the registration of
its Common  Stock  under the  Securities  Exchange  Act of 1934,  go private and
reasonably assure its remaining private for the foreseeable  future. The Company
expects to pay the stockholders whose shares will be cancelled a pre-split price
per  share  to  be  determined  by  the  Board  of  Directors   based  upon  the
recommendation  of a special  committee  appointed to review the transaction and
the receipt of a fairness opinion from an investment banker.  While the price is
subject to receipt of the  fairness  opinion by the  special  committee  and the
Board,  and is subject to change,  the Company  expects that the pre-split price
will be $1.10 per share.

                                       11
<PAGE>


The Company has received a  conditional  consent from its lender that will allow
the Company to complete  the reverse  stock  split  without  violating  its debt
covenants.  The  Company  has  ceased  making  purchases  under  its  previously
announced  stock  repurchase  plan. The Board has determined to refrain from any
purchases under that plan until after the stockholder meeting and the conclusion
of the reverse stock split.

The Board intends to submit the matter to the stockholders with the request that
the  stockholders  give the Board the  authority to implement  the reverse split
using one of three potential ratios:  1-for-1500,  1-for-2500 or 1-for-5000. The
forward stock split would be adjusted to use a corresponding forward ratio, e.g.
1500-for-1,  2500-for-1 or 5000-for-1. This flexibility would allow the Board to
achieve  the  desired  benefits  for the  Company,  in light of any  intervening
changes in the mix of record  holders,  without  having to incur the  expense of
calling  an  additional  stockholder  meeting,  and to not go  forward  with the
reverse stock split should conditions change and the Board then determines it is
no longer in the best interest of the Company and its stockholders to do so.

The matters discussed in this Form 10-Q related to the going private transaction
will be  described  more fully in a proxy  statement  to be  distributed  to the
stockholders. Stockholders should refer to that proxy statement. This discussion
does not constitute a solicitation for any stockholder's vote. The reverse stock
split  is  subject  to  conditions  and  uncertainties,   including  stockholder
approval,  the Boards determination to proceed with the reverse stock split, the
conditions of the consent of the Company's  lender and the Company's  ability to
fund the payment for fractional shares. In addition, the proxy statement for the
stockholder  meeting will be subject to SEC review,  and there may be unforeseen
delays  in  implementing  the  reverse  stock  split.  The  Company  can give no
assurance that it will be able to complete the going private reverse stock split
transaction.

MARKET OVERVIEW AND INDUSTRY

Color Imaging's  market for imaging products is the installed base of electronic
printing devices:  laser printers and facsimile  machines and analog and digital
copiers. Color Imaging competes within this market with products supplied by the
OEM  manufacturers  and with other  suppliers of aftermarket  imaging  products.
Additional  products in this category include  enhancement  products that extend
the capabilities of the OEM's product,  such as magnetic  character  recognition
toners that  enable the  printing  of  magnetic  characters  on checks and other
financial  documents.  We market our products worldwide and regionally primarily
to distributors of imaging products who sell to dealers and large end-users.  To
a lesser extent, we sell to OEMs, re-manufacturers and a few dealers directly.

We believe  the trends in the  electronic  printing  and  photocopying  industry
affecting  original  equipment  manufacturers of these devices,  include (1) the
introduction of products  utilizing  digital and color printing  technologies as
opposed to analog and black text printing,  (2) offering business color printing
solutions  at a cost  per  page  that  are  increasingly  competitive,  (3) OEMs
reducing the selling  price of their  devices while  increasing  their  printing
speed,  functionality and networkability,  (4) OEMs increasing the technological
barriers through the use of specialized  toners  (chemical toners  incorporating
polyesters and proprietary raw materials),  patents and microprocessors (machine
readable  microchips with internet  connectivity for supplies  management),  (5)
OEMs  endeavoring to control the market for consumable  supplies through the use
of OEMs' technologies as barriers to market entry for  re-manufacturers of these
products  or  manufacturers  of like,  new,  aftermarket  products  and (6) OEMs
utilizing prebate (license  arrangements)  and recycling  programs to reduce the
number of OEM cartridges  available for  remanufacture in the aftermarket.  Over
time,  we believe that digital  printers and  photocopy  machines  that print at
speeds of up to 100 pages per  minute  will merge  into one  device,  delivering
multifunctional  capability  and color  printing that are  net-workable  at both
lower prices and operating costs to the end user.  Consumables for these devices
will become increasingly  difficult to remanufacture and for full-color machines
take  longer  to  bring  to  market,   thereby  reducing  the  market  share  of
re-manufacturers  and increasing the  opportunity of increased  market share for
newly manufactured  finished product and for color toner aftermarket  suppliers,
such as Color Imaging.  In our experience,  new aftermarket  consumable products
are typically 25% cheaper than OEM's  consumables  with like  functionality  - a
savings to the consumer.  Seeing that the  aftermarket has  increasingly  gained
acceptance  as product  quality has  steadily  improved,  we believe  that Color
Imaging is positioning itself to take advantage of these trends.

Color Imaging's  solution is, through its own technological  capability and that
of strategic suppliers, to develop and introduce compatible, newly manufactured,
aftermarket  products,  ahead  of  other  aftermarket  competitors,  at a  price
significantly  below  that of the  OEM  and  make  these  products  increasingly
available through distribution channels closer to the end-user.

GROWTH STRATEGY

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 our  manufacturing  facilities,  (4) expanding our
sources for products from strategic suppliers that we can add value to or resell
that complement our product lines, (5) expanding into new geographic  markets to
customers  in the  United  States  and  Europe,  and (6)  broadening  our  sales
channels.

Color  Imaging's  development  of new toner  products is focused on providing an
aftermarket  product for electronic  printing devices that achieves a high level
of market acceptance. Color Imaging endeavors to offer equivalent toner products
with equal or better quality at lower prices than the OEM's toner product.

                                       12
<PAGE>


Color Imaging is committed to increasing  the value added of its toner  products
to the end user by providing not only the toners but also the toner cartridge or
canister that is compatible  with the OEM's  equipment.  Color Imaging  believes
that by developing toner cartridge and canister devices for specific  electronic
printing or copying  machines,  and  integrating  those devices with  compatible
toners, the market for Color Imaging's toner products will expand. Color Imaging
believes that this approach will also result in increased gross margins.

Color  Imaging  will  continue  to  emphasize  its high margin  specialty  toner
capability,  primarily color toners, while providing lower margin MICR and black
text toners in  commodity  bulk to a few  customers.  The bulk  quantity of MICR
black text toners is currently  being  offered to maximize the  efficiencies  of
Color Imaging's  manufacturing plant. The availability of this complete research
and development and manufacturing facility allows for the continued expansion of
specialty, particularly color, toner products.

During  2005,  Color  Imaging  expects to  increase  its sales of higher  margin
digital,  color toners for certain popular  business color copiers and printers.
The  introduction  of a few color  products  in 2003 and 2004 to be  followed by
several  during 2005 and the expansion of our sales channels is expected to help
Color Imaging increase revenues in 2005, offsetting the further loss of revenues
from our two largest customers of the last several years.

GOALS AND FOCUS FOR THE NEXT FIVE YEARS

We are of the belief that to remain a public company and offer our  stockholders
both  attractive  value and  liquidity  we should  have  sales of at least  $100
million to $150  million  per year,  earnings  before  interest,  income  taxes,
depreciation  and  amortization of $10 million to $20 million and move our stock
to a major exchange. We are prepared to grow our Company both internally through
the introduction of uniquely competitive products as well as through mergers and
or acquisitions, even though such an event could mean a change in our management
or control.  Some time ago members of our  management had  conversations  with a
specialist  of the American  Stock  Exchange and  explored  the  possibility  of
listing with American Stock Exchange when our sales,  profitability  and outlook
are such  that we would  benefit  from a major  exchange  listing.  We also made
casual  inquiries of other companies  regarding the desirability of merging with
us.  To  date,  though  one such  contact  led to a number  of  discussions  and
explorations,  a  confidentiality  agreement  and the exchange of financial  and
business information, no definitive understanding or agreement was reached. As a
result,  we  have  not  been  able to  grow  our  business  through  mergers  or
acquisitions  or  significantly  from  operations,  and  we  have  not  realized
increased value befitting a public company for our stockholders. In January 2005
our board of  directors  appointed a special  committee  to  consider  strategic
alternatives.  Based on the committee's recommendations,  the board of directors
of our  Company  approved a going  private  transaction  on April 14,  2005 (see
Recent  Developments  and our Form 8-K filed  with the SEC on April  19,  2005).
However,  there can be no  assurance  that the Company can complete the approved
going  private  transaction  and achieve the savings or benefits  envisioned  by
management.

LAST FIVE YEARS

The purpose of the Merger in 2000 (see  Background) was to combine Color Image's
toner and  consumable  expertise and  manufacturing  plant with Logical  Imaging
Solutions'  advanced printing system capabilities to offer a wider product range
and ensure product supply for Logical Imaging  Solutions' print system,  thereby
becoming an OEM with our own high speed color printer and toner supplies and the
expectation of significantly higher sales and profitability in the future. Being
a public company, we believed,  would afford us the opportunity to raise capital
in the  equity  markets  to finance  significant  planned  growth and to use our
public stock for acquisitions of others, while increasing stockholder value.

We expanded manufacturing capacity four-fold and improved production efficiency,
raised  capital  in a  private  placement  and  pursued a  acquisition  that was
unsuccessful,  necessitating  the  writing  off of  over  $200,000  of  deferred
expenses.  In 2002, upon  determining  that much of Logical  Imaging  Solutions'
technology was not fully developed, proven in beta-testing or commercialized for
sale or accepted in the  marketplace  and  required  an  undetermined  amount of
capital to complete  its  development,  while at the same time  Logical  Imaging
Solutions  continued to incur operational  losses, we divested ourselves of this
unprofitable  subsidiary in which we had invested $2.3 million without realizing
our  initial  goal and  purpose of  becoming a public  company,  namely  being a
successful OEM and substantially increasing stockholder value.

In addition,  we refocused  our strategy as a toner  manufacturer  away from low
margin  (commodity-like)  bulk laser toner and parts products to finished copier
and  printing  products,  to  increase  sales and  margins.  For the year  ended
December  31,  2001,  our sales  reached  $30  million,  with our three  largest
customers  accounting for 70% (some $21 million) of those sales, and during 2004
these customers  account for only about $6.3 million of our net sales, down some
$14.7  million or 70% from  2001.  The  products  sold to these  customers  were
primarily analog copier toners and developers,  and our sales to these customers
of these products have rapidly  declined for several  reasons,  including as the
products are discontinued in the market.  As a result of the decreasing sales to
our largest customers, our total sales have declined.  Challenged to replace the
sales lost from our largest  customers,  we introduced new products and expanded
our sales channels.

In 2003 we  completed  a public  offering  of 4.5  million  shares of our common
stock, raising over $6 million fro our foreign affiliate and introduced 100% new
complicated  toner  cartridges,  generally  referred  to as  all-in-one  ("AIO")
imaging,  toner or drum cartridges with their becoming 11% of sales during 2004.
And,  also,  during  2003 we were  also  the  first  to  introduce  aftermarket,
full-color,  Segment  3 and  4,  networked  copier/printer/MFP  toner  products,
continued  research and  development  on other such products in 2004 and plan to
introduce  several  such new  products  in 2005  (refer to  Recent  Developments
herein).

                                       13
<PAGE>


To our  knowledge  we are the only source for these  full-color  toner  products
worldwide, other than the OEMs. As a result, we stemmed the pattern of declining
sales in 2004.  During the first  quarter  ended March 31, 2005  compared to the
same period in 2004, sales from our two largest customers declined approximately
$800,000,  or  41%,  while  net  sales  to  our  other  customers  increased  by
approximately $800,000, or 22%.

Over the past five years,  we have  transformed our business by moving from bulk
to  finished  products  and from laser  printer to copier  products,  building a
larger and more effective sales and customer support organization, adding copier
dealers and distributors to our customer list, expanding our international sales
from  approximately 10% of sales to now over 50% of our net sales and developing
and successfully marketing business color toner products.

PRODUCTS

Our primary  product focus is full-color,  100% new,  finished  toner  cartridge
products for  multifunctional  printers/devices  ("MFPs"),  copiers and printers
(see  Recent  Developments).   In  particular,  we  are  concentrating  on  work
group/networked  solutions  segments,  complicated  all  in one  cartridges  and
selected  specialty toner products for certain  industrial  applications and for
the printing of magnetic  characters  on checks and or financial  documents.  In
1999  approximately  10% of the  Company's  sales  were  derived  from  finished
products,  while, at this time, some 80% of the Company's sales are derived from
finished products.

While 100% new all-in-one  ("AIO") products are important for increasing  sales,
full-color  ("business color") finished toner products without  competition from
others  except  the  OEMs  for  the  "sweet-spot"  of  digital  multi-functional
copiers/printers,  will make the largest  contribution  to increasing  sales and
profitability.  During 2004  approximately  10% of our sales were  derived  from
these business color products,  and we believe they will be approximately 40% of
our total revenues during 2005.

WHY 100% NEW PRODUCTS AND PRODUCT TRENDS

While remanufactured or refurbished  ("remanufactured") toner cartridges for use
in printers  generally  have 30% of the market in units and 25% in dollar  value
and are just now being introduced for use in copiers,  remanufactured cartridges
have a  perception  with the users  from past  experience  of being of  inferior
quality  even  though they offer a cost  savings.  The quality of the some 2,500
remanufacturers  in  the  U.S.  is,  by its  nature,  inconsistent  and  certain
cartridges cannot be readily  remanufactured  due to the technology  utilized by
the OEMs. Contributing to the perception of poorer quality for these products is
the fact that remanufacturers will not always replace all of the worn parts in a
particular  cartridge.  The  dilemma  is that if too few parts are  changed  the
cartridge  could fail  prematurely  or not deliver the required  print  quality,
while  changing all of the parts subject to wear not only  increases the cost of
the product but also can result in more variation in print performance  compared
to that of the OEM.  While users may save 25% or more by using a  remanufactured
cartridge,  as a  result  of past and  existing  quality  issues  remanufactured
product have consistently enjoyed only a 30% share of the market, leaving 70% of
the users  buying 100% new  product  from the OEM.  Other than the OEM's  better
branding,  having  substantially  greater  distribution  for their  products and
recycling  programs  taking  empty  cores  out  of  the  market,  other  factors
contributing the users opting for the OEM, or new product,  over  remanufactured
includes the inconsistent  availability of remanufactured  cartridges and market
confusion  from  the  marketing  of  remanufactured  cartridges  as  compatible,
remanufactured,  refurbished,  new drum, 100% new parts, or other  descriptions,
and a wide range of prices,  all of which leave the user wondering what is being
purchased.

Increasingly,  the  OEMs  have  moved  to  prevent  aftermarket  companies  from
supplying  alternatives to their product. The OEMs accomplish this by increasing
the technological barriers with patents, chemical toners and computer chips, and
a few have used  licensing  arrangements  (prebate  programs)  for their product
(Lexmark  and  recently  Dell  Computers)  to make  the  remanufacture  of their
cartridges  illegal.  In addition,  recycle  programs  designed to get the OEM's
cartridge back from the user,  effectively keeping it away from remanufacturers,
are growing worldwide.  While recycle programs are touted as being protective of
the  environment,  and they are,  their  effect is to  reduce  competition  from
remanufacturers  by taking  cartridges off the market. On the other hand, a 100%
new product  priced  lower than the OEM and  competitively  with  remanufactured
cartridges, redesigned so as not to infringe on the OEM's intellectual property,
is not  subject  to many of the  above  mentioned  problems.  Further,  with our
improved  financial  strength,  significant  trade  support from our  affiliated
foreign supplier and expected profitability of our color products, we believe we
will not need additional  financial  resources to realize our goals,  excepting,
perhaps,  the needs that may arise should we be  successful in  identifying  and
completing a merger or acquisition.

MARKETING AND SALES

While we have changed our product mix from almost entirely bulk toners and parts
to now primarily  finished  products,  we have also expanded our sales  channels
over the last five years from almost solely unfinished  printer products sold to
domestic  remanufacturers,  and a few distributors serving them, to distributors
and  dealers  worldwide  of  finished  copier and  printer  products,  including
acquiring large private label  arrangements (OEM and distributor).  As a result,
our international sales have increased from approximately 10% to over 50% of our
total sales. We accomplished  this by acquiring  significant  corporate  account
relationships and implementing a worldwide manufacturer's representative program
and recruiting industry experienced and successful technical sales and marketing
executives. During 2005 we plan to substantially increase the sales of our color
copier  products  by  obtaining  additional  large  dealer  customers  for these
products in the United States and distributors in Europe.

                                       14
<PAGE>


STOCKHOLDER VALUE, LIQUIDITY AND MERGERS OR ACQUISITIONS

Many of our stockholders  invested in our private  placement that closed in 2001
at a price  per share of $2.00 per  share  and in 2003 our  public  offering  of
4,500,000  shares of our common stock at $1.35 per share.  We believe that these
and our other stockholders are expecting a return on their investment and a more
liquid market for our stock. In 2002 we divested  ourselves of a subsidiary that
was losing money and had required  investments by us of some $2.35 million.  Its
new owner acquired  several  hundred  thousand  shares of our common stock in an
exchange  thereafter  and it and its management has been selling these shares in
the market since 2003, including through the first quarter of 2005, contributing
to the  decline in our stock  price of from over $2.00 per share  during 2002 to
the low of $0.30 in March 2003.  Though the divestiture of the  subsidiary,  the
completion  of our public  offering  and our improved  operations  significantly
improved the financial condition of the Company,  our stock price languishes and
on April 11, 2005,  closed at $0.48. With the belief that our common shares were
undervalued and represented a good use of some of the Company's working capital,
in 2002 our  Board  of  Directors  approved  through  September  30,  2004,  the
repurchase  of up to the lesser of $1 million or 1 million  shares of our common
stock.  During 2004 our Board of Directors  approved the  extension of our stock
repurchase  program to September 30, 2005, and from inception  through March 31,
2005,  the Company has  repurchased  84,700 of the Company's  common shares at a
cost of approximately $56,100 and at an average price of $0.66. In December 2004
the Company felt either a merger or going private  transaction was becoming more
likely,  and as a result  instructed  its  broker  to halt the  purchase  of the
Company's  common  shares in the market,  and the Company  will not purchase any
additional shares on the market until the going private transaction  approved by
the board on April 14, 2005, is concluded or cancelled.

We  continue  to be  interested  in making our  Company  more  successful,  more
quickly, through a successful acquisition or merger. In that regard our criteria
for a generally acceptable merger/acquisition candidate include:

o    An experienced and capable management team that would remain.
o    A sound and improving financial condition with sales of from $25 million to
     $75 million and earnings before  interest,  income taxes,  depreciation and
     amortization of from $4 million to $15 million.
o    Products  that  would   complement   ours  and  offer  unique   competitive
     advantages.
o    Sales channels to include office product superstores,  contract stationers,
     corporate accounts, copy product distributors or dealers.
o    Distribution  not only in the  United  States but  preferably  in Europe as
     well.
o    A core value and excellent reputation for high quality.

Our  management  realizes that an acquisition or merger with a company like that
described  above  could mean  changes  to both the  existing  management  of our
Company,  control over the Company's operations and, among other things, whether
or not the Company is the  surviving  entity or remains a public  company.  With
approximately  75% of our  common  shares  controlled  by  directors,  officers,
affiliates and other family members, management believes that these stockholders
and  others  could be  persuaded  to vote  for the  completion  of a  merger  or
acquisition that was expected to increase in the future both  stockholder  value
and liquidity. However, management has had preliminary discussions with a number
of potential  merger  candidates  over the last few years without  coming to any
conclusion on a transaction.

At this time there are no definitive proposals for a merger transaction,  though
we continue to seek out and engage in  discussions  with  prospective  merger or
acquisition candidates and previously formed a special committee of the board of
directors to investigate  strategic  alternatives,  including going private.  We
have  found that as a result of our being  public,  it is more  difficult  for a
private company to be merged with us, due to the requirements of  Sarbanes-Oxley
and other  securities laws and  regulations.  There can be no assurance that any
merger or going private transaction will be completed.


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, 2005  increased by  approximately
$28,000,  or less than 1%, to $5.6 million,  compared to 2004. Net sales in 2005
increased  primarily due to increased  sales  derived from color and  monochrome
copier toner  product  sales to customers  other than our  historically  largest
customers  whose sales for the first quarter 2005 compared to the same period of
2004 declined  approximately  $800,000. In the three months ended March 31, 2005
and 2004,  our net sales  were  primarily  generated  from the sale of  finished
consumable  products  for  electronic  printers  and  photocopying  machines and
comprised  approximately 83% and 76% of net sales,  respectively.  For the three
months ended March 31,  2005,  our  historically  two largest  imaging  products
customers  accounted  for 16% and 4% of net sales,  respectively,  while for the
same  period in 2004 they were 30% and 5% of net sales,  respectively.  Sales to
these customers consist primarily of analog copier products, and as a result are
expected to be less than 10% of our total sales in 2006.

Net sales made  outside of the United  States  increased to  approximately  $2.9
million,  or 53% of total  sales  for the three  months  ended  March 31,  2005,
compared to $2.4 million, or 43% for the three months ended March 31, 2004. This
increase in international sales resulted primarily from the increase in sales of
color copier  products to customers  other than our two,  historically,  largest
customers.

                                       15
<PAGE>


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, 2005, as well as for Color Imaging's two general product lines.

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

                                 Backlog                            Backlog
                                at start                             at end
                                   of         New         Net          of
                                  Year       Orders     Revenue     Quarter
                                --------    --------    --------    --------
                                            (IN THOUSANDS OF DOLLARS)
2005:
  Copier/AIO Products           $  1,404    $  4,437    $  4,667    $  1,173
  Printer Products                   547         799         962         385
                                --------    --------    --------    --------
     Total                         1,951       5,236       5,629       1,558
                                ========    ========    ========    ========
</TABLE>


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  consolidated
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.  For
the  years  ended  December  31,  2004,   2003  and  2002  our  write-offs  were
approximately  $19,638,  $41,339 and $8,733,  or averaged  less than $20,000 per
year. As of March 31, 2005, we had  $2,780,078 of accounts  receivable  net of a
$93,965 valuation allowance.

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. For the years ended December 31, 2004, 2003
and 2002 we made  inventory  obsolescence  reserves of  $280,000,  $275,000  and
$240,000,  totaling  $795,000,  or an average of $265,000 per year,  and we have
written-down or disposed of  approximately  $296,000,  $212,000 and $279,000 for
the same period for a total of $787,000 of inventory,  or an average of $262,000
per year. Our experience  over the last few years has indicated an  obsolescence
rate  of  approximately  $20,000  per  month.  As of  March  31,  2005,  we  had
approximately  $5,331,000 of inventory net of approximately a $128,700 valuation
provision.

                                       16
<PAGE>


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. Our manufacturing equipment is
suitable  for, and is used to make,  a large number of products,  and as such we
have  not  experienced  any  impairment  due  to  the   discontinuation  of  any
product(s).  During  the  years  2000  through  2002 we moved and  expanded  our
manufacturing facilities,  upgrading the technologies we employ, and during 2003
we continued to upgrade and take out of service  equipment  that has reached its
useful  life or was no  longer  competitive,  much  of all of  which  was  fully
depreciated.  We have  approximately $8.2 million invested in such equipment and
plant improvements,  with a carrying value of $6.1 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.  We
incurred  no  material  warranty  expenses  for 2004,  2003 and 2002.  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, manufactured by us and by others and distributed by
us through more sales  channels,  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,
2005, a increase of  approximately  0.5% from March 31,  2004.  The net sales by
product category were as follows:
<TABLE>
<CAPTION>
<S>                            <C>         <C>    <C>           <C>       <C>

                                                  % Increase
 (Dollars in thousands)             2005       %   (Decrease)     2004         %
                               ----------  -----  ----------   ----------  -----
Product Category:
 Cartridges and bottles
  Copier/AIO finished products   $ 4,290      76%      19%      $  3,600     64%
  Printer finished products          367       7%     (44%)          660     12%
                               ----------         ----------   ----------
                                   4,657      83%       9%         4,260     76%

Bulk toner and parts                 972      17%     (28%)        1,341     24%
                               ----------         ----------   ----------
      Total net revenue          $ 5,629     100%       0%       $ 5,601    100%
                               ==========         ==========   ==========
</TABLE>

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


                                                THREE MONTHS ENDED
                                                    MARCH 31,

                                           ------------------------
                                             2005            2004
                                            ------          ------
                                           (PERCENTAGE OF NET SALES)

Net sales                                     100             100
Cost of sales                                  68              75
Gross profit                                   32              25
Administrative expenses                         8               7
Research and development                        5               5
Sales and marketing                            14              11
Operating income                                5               2
Interest expense                                -               1
Depreciation and amortization                   3               2
Income before taxes                             6               3
Provision for income taxes                      2               1
Net income                                      4               2

                                       17
<PAGE>


THREE MONTHS ENDED MARCH 31, 2005 COMPARED TO THREE MONTHS ENDED MARCH 31, 2004

NET SALES.  Our net sales  increased by $28,000,  or 0.5%, to $5.629 million for
the three months ended March 31, 2004,  from $5.601 million for the three months
ended March 31, 2004.  Net sales made in the United States were $2.6 million,  a
decrease of $0.6  million,  or 17%,  from $3.2  million  made in the  comparable
period in 2004.  Net sales  made  outside  of the  United  States  increased  by
approximately $0.6 million, or 24%, for the current quarter compared to the same
quarter of 2004. The decrease in net sales for the current  quarter  compared to
that of a year ago of approximately $800,000 from our two, historically, largest
customers was offset by the increase in our color and  monochrome  toner product
sales to other  customers.  Of the $5.6 million in net sales,  $4.7 million,  or
83%, were  attributable to our copier and printer finished  products,  while net
sales of these same  products  were $4.3  million,  or 76%,  for the  comparable
period in 2004. The revenue increase from copier finished  products from 2004 to
2005 was 19%,  reflecting  primarily increased sales of our color and monochrome
copier  products  to  customers  other  than  our  two,  historically,   largest
customers. Sales of our bulk toner and parts products for the three months ended
March 31, 2005 were $1.0 million compared to $1.3 million for the same period of
2004.  We believe that sales of our finished  copier and printer  products  will
continue  to  increase  while  sales of our bulk toner and parts  products  will
continue to decrease  during 2004,  as the result of our not  introducing  fewer
monochrome  and  color,  commodity,  bulk laser  toner  products  and  increased
competition.

COST OF GOODS SOLD. Cost of goods sold decreased by approximately  $363,000,  or
9%, to $3.8  million from $4.2 million for the three months ended March 31, 2005
and for the comparable  period in 2004,  primarily as the result of the decrease
in lower  margin net sales to our two  largest  customers  and the  increase  in
higher, color, finished product sales. Cost of goods sold as a percentage of net
sales decreased by 7 percentage points from 75% for the three months ended March
31, 2005 to 68% for the three  months  ended March 31,  2005,  primarily  as the
result of reduced sales derived from certain very low margin products previously
sold to our largest  customers  and a larger  percentage  of sales being derived
from sales of color  products  with  higher  gross  margins.  With the  expected
increase in sales  derived from our color copier toner  products,  we expect our
cost of goods sold to further decrease as a percentage of net sales.

GROSS PROFIT.  As a result of the above factors,  gross profit increased to $1.8
million in the three  months ended March 31, 2005 from $1.4 million in the three
months ended March 31, 2005, or approximately  $.4 million,  while net sales for
the same period increased by $28,000.  Gross profit as a percentage of net sales
increased  by 7  percentage  points from 25% to 32% for the three  months  ended
March 31, 2005, as compared to the corresponding period of the prior year.

OPERATING  EXPENSES.  Operating expenses increased $187,000 million,  or 14%, to
$1.49 million in the three months ended March 31, 2005 from $1.30 million in the
three months ended March 31, 2004. General and  administrative,  selling and R&D
expenses  increased,  as a percentage  of net sales,  to 27% in the three months
ended March 31, 2005 from 23% in the three months ended March 31, 2004.  General
and administrative  expenses increased approximately 10%, or $40,000 to $437,000
for the three  months ended March 31, 2005 from the  comparable  period in 2004,
largely  resulting from $50,000 paid for strategic  advisory  services.  Selling
expenses increased by $163,000, or 27%, in the three months ended March 31, 2005
compared to the three months ended March 31, 2004.  Selling  expenses  increased
primarily as a result of increased  payroll expenses and recruiting fees paid in
connection with the hiring of five regional sales vices presidents in the United
States and increased travel related expenses.  Research and development expenses
decreased  by $16,000,  or 5%, to $294,000 in the three  months  ended March 31,
2005, primarily as the result of decreased payroll expenses which were partially
offset by higher product testing expenses.

OPERATING INCOME.  As a result of the above factors,  operating income increased
by $204,000,  or 202%, net of the $50,000 paid for strategic  advisory services,
to a profit of $305,000 in the three months  ended March 31, 2005 from  $101,000
in the three months ended March 31, 2004.

INTEREST AND FINANCE  EXPENSE.  Interest expense was $24,000 in the three months
ended March 31, 2005 and for the three months ended March 31, 2004. The decrease
in the level of  interest  bearing  debt was offset by the  increase in interest
expenses  resulting from the increase to interest rates. We expect that our debt
levels will continue to decline in 2005, while the average rate we are paying on
our debt facilities will increase.

OTHER INCOME.  Other income decreased by $52,000, or 74%, from income of $94,000
to income of $42,000 in the three  months  ended  March 31,  2005 from the three
months  ended March 31, 2004,  primarily  as the result of lower income  derived
from the exchange of Euros with the resetting of the Euro exchange rate to 1.25.

INCOME  TAXES.  As the result of our profit in the three  months ended March 31,
2005,  we recorded an income tax  provision  of  $101,800,  after  reducing  the
valuation  allowance for deferred tax assets  $28,000 for the period,  while the
income tax  provisions  were  $68,000 for the three months ended March 31, 2004.
Based upon our  current  profitability,  during 2005 we expect to reverse all of
the deferred  tax asset  valuation  allowance of $112,500  that we had as of the
year ended  December 31, 2004 in connection  with our net  operating  loss carry
forward.

LIQUIDITY AND CAPITAL RESOURCES

At March 31, 2005, and December 31, 2004, our working  capital and current ratio
was  approximately  $8.0  million and $7.4  million and 4.65 to 1 and 4.54 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 and our improved profitability.

                                       18
<PAGE>


Cash flows  provided by operating  activities  were $823,000 in the three months
ended March 31, 2005 compared to $406,000 used in operations in the three months
ended March 31, 2004. The cash flows provided by continuing operating activities
in the three months ended March 31, 2005 increased primarily due to the decrease
in other  assets,  a prepayment of some $650,000 was made on the IDR bond by our
affiliate,  and an increase in accounts payable and other liabilities.  Overall,
with our  sales  internationally  increasing  as a  percentage  of our total net
sales, our collections of accounts  receivable are expected to continue to slow,
since we sell  internationally  typically  on longer  terms and payment by these
customers is often beyond terms.  As a result,  the carrying of higher levels of
accounts  receivable will likely be an increasing use of our cash, together with
higher  levels of inventory to support our new color product  introductions  and
customers in Europe.

Cash flows used in investing  activities were $207,000 in the three months ended
March 31,  2005,  compared to $125,000 in the three months ended March 31, 2004.
The  increase in cash used in  investing  activities  in the three  months ended
March 31,  2005,  was  primarily  attributable  to the  acquisition  of  factory
equipment.

The Company has a $1.5 million  revolving  line of credit,  as amended,  with an
outstanding  balance  as of  March  31,  2005  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,  2005,  the  interest  rate was the
one-month Libor rate of 2.86% plus 2.50% (5.36%).  This revolving line of credit
has a June 30, 2005 expiration  date, and we plan to renew it for up to one year
to expire June 30, 2006.  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.  On January  5,  2005,  the  irrevocable  standby  letter of credit was
amended and reduced by $500,000 to $1 million.  At March 31, 2005 the  Company's
accounts  payable and purchase  commitments to this supplier were  approximately
$654,800.  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, 2005, the Company was in compliance with these
covenants.

Cash  flows  used by  financing  activities  were  $743,000,  primarily  for the
repayment of $650,000 of IDR bond and $67,000 of affiliate  debt,  for the three
months ended March 31, 2005 compared to cash flows used by financing  activities
of $112,000 for the same period in 2004.

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 March 31, 2005, Color Imaging has
repurchased 84,700 shares of our common stock for approximately  $56,100, or for
an average price of $0.663 per share.  During  December 2004, the Company halted
the  repurchase  of its  common  shares  in the  market  and does not  intend to
purchase  additional shares in the market until such time as the Company's going
private  transaction  is completed or cancelled.  In  connection  with the going
private  transaction,  we expect to incur a total of approximately  $250,000 for
transaction expenses,  including legal,  accounting and investment banking fees,
and we expect to expend approximately  $250,000 to cash out the fractional share
holdings.  The Company believes it has sufficient  working capital to fund these
expenditures without incurring any additional debt.

Our liquidity is affected by many factors,  some based on the normal  operations
of our  business  and others  related to the  uncertainties  of the industry and
global  economies.  Although our cash  requirements  will fluctuate based on the
timing of these factors, we believe that current cash and cash equivalents, cash
flows from operations and amounts  available under our credit agreement will be,
in the aggregate,  sufficient to finance our operating and investing  activities
for at least the next 12 months,  which will include  expenditures not to exceed
approximately  $675,000 for manufacturing  equipment,  $150,000 for research and
development equipment,  $175,000 potentially for computer and software upgrades,
the estimated $500,000 to complete our going private transaction and the staging
of some  $250,000 of  inventory  in Europe to support  the growing  sales of our
color copier  products in that market and any  advances  made by our bank on our
behalf  under our  off-balance  sheet  arrangement  of $1 million  for a standby
letter of credit issued to a non-affiliated foreign supplier.

                                       19
<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  three  months  ended  March  31,  2005,  one  customer  accounted  for
approximately  16% of our net sales,  down from 24% for the twelve  months ended
December 31, 2004.  We do not have a contract  with this customer 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 this customer,  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, 2005,  receivables  from one customer  comprised 10% 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  20% OF OUR BUSINESS DEPENDS ON A FOREIGN SUPPLIER APPROVED BY TWO
OF OUR CUSTOMERS TO WHOM WE HAVE ISSUED A LETTER OF CREDIT.

Some  of  our  products  incorporate  technologies  that  are  available  from a
particular  foreign  supplier  that has been  approved by two of our  customers.
Approximately  20% of our sales for the three  months  ended March 31, 2005 were
derived from  products  limited to a specific  foreign  supplier.  For the three
months ended March 31, 2005,  we  purchased  23% 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.  To secure the payment of moneys due this
same  foreign  supplier  we have  caused  our bank to issue a standby  letter of
credit in the  amount of $1.5  million,  amended  and  reduced  to $1 million on
January 5, 2005,  that expires  June 30, 2005.  We expect to renew the letter of
credit  prior to its  expiration.  Should we be unable to obtain  the  necessary
materials  from this  foreign  supplier,  including as a result of our not being
able to  modify,  extend or renew the  letter of  credit  upon  expiry,  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.

                                       20
<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,  and we continue  to make  investments  in and acquire and
install new factory  equipment.  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 those 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,  as well as obtaining
additional channels through which to sell various products. 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
all-in-one  cartridges,  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,  or  that we will be
successful in increasing our sales to large regional,  national or international
retailers.  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 53% of net sales in the three months
ended March 31, 2005. We expect that shipments to  international  customers will
continue to account for a material portion of net sales.  During the three month
period ended March 31, 2005, our sales were made to customers outside the United
States as follows:

o    Europe (including Eastern Europe) - 34%
o    Mexico - 10%
o    Asia/Southeast Asia - 5%
o    Other - 4%

                                       21
<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,  the Company 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 $154,583, $149,110 and
$2,858 during the twelve month periods ended  December 31, 2004,  2003 and 2002,
respectively,  as a result of foreign currency  transactions,  and for the three
months ended March 31, 2005, we reported a gain of $3,523.

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 either  party upon  giving the  required  notice may
terminate  them.  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.

                                       22
<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,  our going
private,  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.  We are  exploring the
possibility of a strategic  merger.  Any such merger could result in a change in
control of the Company. There can be no assurance that any merger or acquisition
could be successfully  completed.  In addition, the Company could incur expenses
in exploring a merger or acquisition transactions that are not completed.

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.

DUE TO INHERENT LIMITATIONS,  OUR SYSTEM OF DISCLOSURE AND INTERNAL CONTROLS AND
PROCEDURES MAY NOT 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,  the  Company's  system of disclosure or internal
controls and procedures may not be successful in preventing all errors or fraud,
or  in  making  all  material  information  known  in a  timely  manner  to  the
appropriate  management.  In  addition,  we have not  completed  our  policy and
procedure documentation and testing of internal control over financial reporting
as required under Section 404 of the  Sarbanes-Oxley  Act. If we fail to achieve
and  maintain  the  adequacy of our internal  controls,  as such  standards  are
modified,  supplemented  or  amended  from  time to time,  we may not be able to
ensure that we can conclude on an ongoing basis that we have effective  internal
controls  over  financial  reporting in accordance  with Section 404.  Moreover,
effective  internal controls are necessary for us to produce reliable  financial
reports and are  important  to helping  prevent  financial  fraud.  If we cannot
provide reliable  financial reports or prevent fraud, our business and operating
results  could be  harmed,  investors  could  lose  confidence  in our  reported
financial   information,   and  the  trading  price  of  our  stock  could  drop
significantly.

                                       23
<PAGE>


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.

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 28% 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.

                                       24
<PAGE>


EXERCISE OF OPTIONS WILL DILUTE  EXISTING  STOCKHOLDERS  AND COULD  DECREASE THE
MARKET PRICE OF OUR COMMON STOCK.

As of April 20, 2005, we had issued and outstanding  12,690,305 shares of common
stock,  options and  warrants to purchase an  additional  1,410,000  and 100,000
shares of common stock, respectively. The existence of the remaining options and
warrants may adversely affect the market price of our common stock and the terms
under which we obtain additional equity capital.

THE COMPANY MAY GO PRIVATE,  WHICH MAY RESULT IN STOCKHOLDERS OWNING SHARES IN A
PRIVATE COMPANY WITHOUT THE ABILITY TO SELL THEIR SHARES IN THE PUBLIC MARKET.

The Board on April 14,  2005,  approved a "going  private"  transaction  for the
Company. One result of such a transaction would be to remove the Company's stock
from trading on the OTC Bulletin Board,  and the stock would not be eligible for
trading on any stock  exchange.  The Company has less than 300 holders of record
of its common stock, and is eligible to terminate its SEC reporting requirements
without  stockholder  approval or  additional  financing.  Should the Company go
private,  some stockholders may have shares in the Company for which there would
be no public  market  and their  ability to sell the  shares  would be  impeded.
Furthermore,  the Company would not file current, quarterly or annual reports or
be  subject  to  the  proxy   requirements  of  the  federal   securities  laws.
Stockholders  may therefore find it more difficult to obtain  information  about
the  Company  and its  financial  performance.  The  Company  expects  to  incur
substantial  expenses in connection  with the going private  transaction and may
not be able to realize  sufficient  cost savings to recover those  expenses.  In
addition, should the Company go private, this may adversely affect the Company's
access to capital and its ability to complete any proposed merger transaction.

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, AND IF
WE GO PRIVATE MAY ONLY BE TRADEABLE  IN THE PINK SHEETS,  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,  and may, if we go
private, be traded only in the pink sheets, the liquidity of our common stock is
impaired,  not only in the  number of shares  in float and 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.

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;

                                       25
<PAGE>


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  effecting a going private  transaction  and realizing any
savings and improved  profitability as a result,  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,  whether or not we will remain public or go private, 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,  particularly  business  color and all in one  products,  and our
increasing  our sales from  business  color and all in one  cartridges,  digital
copier,  color and magnetic  character  recognition  toner products,  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.  These factors  include the "Risk Factors"
discussed above.

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.

                                       26
<PAGE>


Beginning in 2001,  we became  subject to foreign  currency risk with respect to
future costs or cash flows from our sales in Euros.  We estimate  that about 96%
of our  transactions are denominated in U.S.  dollars,  excepting those 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  $3,500 in the quarter ended March 31, 2005,
and we incurred a net foreign currency  transaction  gain of $154,583,  $149,110
and $2,858 in the years ended  December 31, 2004,  2003 and 2002,  respectively.
Our  pricing for our  products  sold in Euros is  currently  at the rate of 1.25
Euros  relative to the U.S.  dollar.  A 10% change in the value of the Euro from
1.25 Euros relative to the United States  dollar,  based upon the sales in Euros
for the first  quarter  of 2005,  would  cause  approximately  a $6,700  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,
2005, 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  approximately
$1 million invested in short-term securities  available-for-sale  through a fund
at March 31,  2005,  and we received  dividends  of  approximately  $3,800 while
recording a net asset value  decrease  of  approximately  $2,900 for the quarter
ended  March  31,  2005.  During  March  2005  Color  Imaging  moved  all of its
investments into short term agency securities.

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) We maintain  disclosure  controls and procedures  that are designed to ensure
that  information  required  to be  disclosed  on our  Exchange  Act  reports is
recorded,  processed,  summarized and reported within the time periods specified
in the  Commission's  rules and forms,  and that such information is accumulated
and  communicated to our management,  including our Chief Executive  Officer and
Chief Financial  Officer,  as appropriate,  to allow timely decisions  regarding
required disclosure.

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,  evaluation  of controls  may not
detect all control  issues and instances of fraud,  if any,  within the Company.
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.  The design may
not succeed in achieving its stated goals under all potential future conditions.
The Company has,  however,  designed its  disclosure  controls and procedures to
provide,  and believes that such controls and procedures do provide,  reasonable
assurance  that  information  required to be disclosed by the Company in reports
that it files or submits under the Securities  Exchange Act of 1934 is recorded,
processed,  summarized  and reported  within the time  periods  specified in the
SEC's  rules  and  forms.  The  disclosure  in  this  paragraph  about  inherent
limitations of control  systems does not modify the conclusions set forth in the
next paragraph of the Company's Chief Executive  Officer and its Chief Financial
Officer  concerning the effectiveness of the Company's  disclosure  controls and
procedures.

As of the end of the period  covered by this report,  March 31, 2005, we carried
out an evaluation,  under the  supervision and with the  participation  of Color
Imaging's management,  including our Chief Executive Officer and Chief Financial
Officer,  of the  effectiveness  of the design and operation of Color  Imaging's
disclosure  controls  and  procedures.  Based  upon this  evaluation,  the Chief
Executive  Officer and Chief  Financial  Officer  concluded  that our disclosure
controls and  procedures  were effective at the  reasonable  assurance  level to
ensure that information  required to be disclosed on our Exchange Act reports is
recorded,  processed,  summarized and reported within the time periods specified
in the  Commission's  rules and forms,  and that such information is accumulated
and  communicated to our management,  including our Chief Executive  Officer and
Chief Financial  Officer,  as appropriate,  to allow timely decisions  regarding
required disclosure.

b) Our Chief  Executive  Officer and Chief  Financial  Officer  are  involved in
ongoing evaluations of internal controls.  On April 19, 2005, 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, 2005.

                                       27
<PAGE>


                                    PART II

ITEM 1. LEGAL PROCEEDINGS

None.

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

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 Company's officers and
directors  commenced the offering.  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.  Though management is authorized to
repurchase the Company's common stock in the aggregate amount of $1,000,000, due
to the  limitations  imposed  by Rule  10b-18 and the  limited  number of shares
repurchased  to date in accordance  therewith  and  considering  the  repurchase
program,  as approved  by the board,  expires  September  30,  2005,  the use of
proceeds per Form SB-2 as reflected  herein is based upon no more than  $500,000
being  expended  for this  purpose and very likely  much less.  And,  given that
management does not intend to repurchase any additional  shares of the Company's
common stock in the market until the  Company's  going  private  transaction  is
either  completed or cancelled,  it is likely that no  additional  funds will be
expended to repurchase the Company's common stock in the market. Management will
evaluate,  later this year,  the  reallocation  of these  funds,  as well as the
potential  extension of the repurchase program beyond September 30, 2005, as the
status of the Company's going private transaction becomes more clear.

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, 2005,  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 reduce IDR Bond debt (4). . . . . . . .     $         0     $  (548,928)    $   846,264      $   297,336
To acquire capital assets. . . . . . . . .     $ 1,500,000     $  (318,774)    $         0      $ 1,181,226
To repurchase our stock (5). . . . . . . .     $         0     $   (56,133)    $   500,000      $   443,867
For other general corporate purposes
 including working capital . . . . . . . .     $ 2,175,000     $(  736,072)    $  (577,490)     $   861,438
                                               -----------     ------------                     -----------
                                       Total:  $ 6,075,000     $(3,291,133)                     $ 2,783,867
Pending application:
-------------------
Short-term investments  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,283,867
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 was 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
was 7.90% per  annum  and the  monthly  principal  and  interest  payments  were
$27,205.
(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) 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 1.09% revenue bonds, 2.09% inclusive
of the 1% letter of credit  fee,  as of June 30,  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. 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 relocate, 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. As of


                                       28
<PAGE>

December 31, 2004, the bond principal outstanding was $2,725,000 and the portion
due from Kings  Brothers,  LLC was  $647,428.  The  $846,264 of  principal to be
repaid under the IDR bond, as reallocated hereinabove, is the Company's share of
the bond  principal  due and  payable  on the 1st of July  2003,  2004 and 2005,
respectively.
(5) From July 2003 through  March 31,  2005,  under the  repurchase  program the
Company has repurchased 84,700 shares of our common stock on the open market for
$56,133,  or at an average price of $0.66. All of the shares  repurchased  under
the program have been cancelled and retired as of March 31, 2005.  There remains
$943,867  available for future common stock  repurchases under the authorization
of the board of directors and $443,867 as allocated by management hereinabove.

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.

The Company's  share of the principal  payment due under the IDR Bond on July 1,
2003,  in the  amount of  $266,840  has been  paid,  and as of March  31,  2005,
$282,088  was  paid on the IDR  bond  debt due July 1,  2004.  The  above  table
reflects the July 1, 2003 and 2004 payments on the IDR bond. The Company's share
of the  principal  payment due under the IDR bond on July 1, 2005,  is $297,336.
With the amendment of the Joint Debtor  Agreement  between the Company and Kings
Brothers,  LLC, Kings Brothers'  portion of the outstanding  principal due under
the IDR  bond  was  prepaid  on March 8,  2005  and was  applied  to the  entire
principal installment due July 1, 2005. As a result, the Company does not have a
principal installment to pay on July 1, 2005 under the IDR bond, and instead the
Company's next installment in the amount of $405,000 will be due July 1, 2006.

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 owning 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 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,  2005,  as extended by the board of  directors  during the annual
meeting held on May 18, 2004, and we have reallocated proceeds for this program.
From July 2003  through  December  31, 2003,  under the  repurchase  program the
Company  repurchased  44,500 shares of our common stock on the open market at an
average  price of $0.65.  From January 1 through  December  31, 2004,  under the
repurchase program the Company has repurchased 40,200 shares of our common stock
on the open market at an average  price of $0.68.  From January 1 through  March
31, 2005,  the Company has not  repurchased  any of our common stock.  Since the
inception of the repurchase program the Company has repurchased 84,700 shares of
our common  stock for $56,133 and at an average  price of $0.66.  There  remains
$943,867  available  for future common stock  repurchases,  as authorized by the
board of directors.
<TABLE>
<CAPTION>


--------------------------------------------------------------------------------------------------
                        ISSUER (MARKET) PURCHASE OF EQUITY SECURITIES
--------------------------------------------------------------------------------------------------
<S>                  <C>             <C>              <C>                   <C>
                                                                            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 (1)               59,500       0.69                  59,500

During 2004                   40,200       0.68                  40,200
                     ---------------- --------------- -------------------- -----------------------
During 2005
  January                          0         --                       0
  February                         0         --                       0
  March                            0         --                       0
                     ---------------- --------------- -------------------- -----------------------
Total 2005                         0         --                       0             1,000,000
                     ---------------- --------------- -------------------- -----------------------
Total                         99,700       0.66                  99,700             1,000,000

</TABLE>

                                       29
<PAGE>


(1) Includes 15,000 shares purchased by Jui-Chi Wang, who may be deemed to be an
affiliated  purchaser  under Rule  10b-18.  These shares are not included in the
Company's stock repurchase program.


ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

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

None

ITEM 5. OTHER INFORMATION

None



                                       30
<PAGE>


ITEM 6 -EXHIBITS
(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.

                                       31
<PAGE>



Exhibit
   No.         Description
--------       -----------
   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.
   4.14        Amendment to Loan Documents  between Color Imaging and SouthTrust
               Bank dated June 29,  2004,  incorporated  by reference to Exhibit
               4.14 to the Registrant's Form 10-Q for the quarter ended June 30,
               2004.
   10.1        Second  Amendment to Joint  Debtors  Agreement by and between the
               Registrant and Kings Brothers LLC,  incorporated  by reference to
               Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed
               On March 15, 2005.
   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.

(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.


                                       32
<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 21, 2005                     Jui-Kung Wang
                                   Chief Executive Officer



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




                                       33