|  **UNITED                  STATESSECURITIES AND EXCHANGE COMMISSION**WASHINGTON,                  D.C. 20549 |
|-------------------------------------------------------------------------------------------------------------------|
|                                                                                                              |
|                                                                                                              |
|  **FORM                  10-Q**                                                                              |

|  **Quarterly                Report Pursuant to Section 13 or 15 (d)**                     |
|------------------------------------------------------------------------------------------------|
|  **of                the Securities Exchange Act of 1934**                                |
|                                                                                      |
|  For                Quarterly Period Ended December 31, 2005                              |
|                                                                                      |
|  Commission                File Number 0-10832                                            |
|  **AFP                  Imaging Corporation**                                             |
|  (Exact                  Name of Registrant as Specified in Its                  Charter) |

| New                      York                                   |   |                        13-2956272                           |
|-----------------------------------------------------------------|--------|------------------------------------------------------------------|
| (State                      or Other Jurisdiction of            |   |                        (I.R.S. Employer Identification No.) |
| Incorporation                      or Organization)             |   |                                                             |
|                                                            |   |                                                             |
| 250                      Clearbrook Road, Elmsford, New York    |   |  10523                                                      |
| (Address                        of Principal Executive Offices) |   |  (Zip                      Code)                            |

|  914-592-6100                                                                                         |
|------------------------------------------------------------------------------------------------------------|
|  (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                     o |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |   |   |   |
|  Indicate                    by check mark whether the registrant is a large accelerated filer,                    an                    accelerated filer, or a non-accelerated filer.                                                                                                                                                                                                                                                                                                                                                                                                                         |   |

|  Large                        accelerated filer o | Accelerated                        filer o |  Non-accelerated                        filer x |
|--------------------------------------------------------|--------------------------------------------|------------------------------------------------------|

|  Indicate                        by check mark whether the registrant is a shell company (as                        defined in                        Rule 12b-2 of the Exchange Act). Yes  o  No                        x |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  The                        registrant had 9,568,217 shares of its common stock outstanding                        as of                        January 31, 2005.   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|  · |   | adverse                  changes in general economic conditions,                                                                                                                                                                                                                                                                                                  |
|--------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  · |   | the                  Company’s ability to repay its debts when due,                                                                                                                                                                                                                                                                                         |
|  · |   | changes                  in the markets for the Company’s products and services,                                                                                                                                                                                                                                                                            |
|  · |   | the                  ability of the Company to successfully design, develop,                  manufacture and sell new products,                                                                                                                                                                                                                                  |
|  · |   | the                  Company’s ability to successfully market its existing and                  new products,                                                                                                                                                                                                                                               |
|  · |   | adverse                  business conditions,                                                                                                                                                                                                                                                                                                                     |
|  · |   | changing                  industry and competitive conditions,                                                                                                                                                                                                                                                                                                    |
|  · |   | maintaining                  operating efficiencies,                                                                                                                                                                                                                                                                                                              |
|  · |   | pricing                  pressures,                                                                                                                                                                                                                                                                                                                               |
|  · |   | risks                  associated with foreign sales,                                                                                                                                                                                                                                                                                                             |
|  · |   | the                  Company’s ability to attract and retain key personnel,                                                                                                                                                                                                                                                                                 |
|  · |   | difficulties                  in maintaining adequate long-term financing to                  meet the Company’s obligations and fund the Company's                  operations,                                                                                                                                                                            |
|  · |   | changes                  in the nature or enforcement of laws and regulations                  concerning the Company’s products, services, suppliers, or                  customers,                                                                                                                                                                       |
|  · |   | determinations                  in various outstanding legal                  matters,                                                                                                                                                                                                                                                                            |
|  · |   | changes                  in currency exchange rates and regulations,                  and                                                                                                                                                                                                                                                                         |
|  · |   | other                  factors set forth in this Quarterly Report on Form 10-Q, and the                  Company’s                  Annual Report on Form 10-K for the year ended June 30, 2005, and                  from time                  to time in the Company’s other filings with the Securities and Exchange                  Commission. |

**PART      I. Financial Information**

----

**Item        1: FINANCIAL STATEMENTS**

**AFP        Imaging Corporation and Subsidiaries**

**Consolidated        Balance Sheets - December 31, 2005 and June 30, 2005**

| **Assets**                                                                                                                                                           |   | **December                                    31, 2005** |          | **June                                    30,****2005** |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------|---------------|---------------------------------------------------------|--------|
|                                                                                                                                                                 |   | (Unaudited)                                              |          |                                                    |   |
| Current                                    Assets:                                                                                                                   |   |                                                     |          |                                                    |   |
| Cash                                    and cash equivalents                                                                                                         |   | $                                                        | 1,223,689     |                                                    | $      | 331,009 |   |
| Accounts                                    receivable, less allowance for doubtful accounts of $90,000 and                                    $90,000, respectively |   |                                                     | 2,672,128     |                                                    |   | 2,704,136 |   |
| Inventories                                                                                                                                                          |   |                                                     | 3,351,553     |                                                    |   | 3,921,383 |   |
| Prepaid                                    expenses and other current assets                                                                                         |   |                                                     | 74,283        |                                                    |   | 89,069 |   |
| Deferred                                    income taxes                                                                                                             |   |                                                     | 680,000       |                                                    |   | 680,000 |   |
|                                                                                                                                                                 |   |                                                     |          |                                                    |   |   |   |
| **Total                                    current assets**                                                                                                          |   |                                                     | 8,001,653     |                                                    |   | 7,725,597 |   |
|                                                                                                                                                                 |   |                                                     |          |                                                    |   |   |   |
| Property                                    and Equipment                                                                                                            |   |                                                     |          |                                                    |   |   |   |
| At                                    cost                                                                                                                           |   |                                                     | 1,753,341     |                                                    |   | 1,623,043 |   |
| Less                                    accumulated depreciation                                                                                                     |   |                                                     | (1,346,174    | )                                                       |   | (1,234,305 | ) |
|                                                                                                                                                                 |   |                                                     | 407,167       |                                                    |   | 388,738 |   |
|                                                                                                                                                                 |   |                                                     |          |                                                    |   |   |   |
| Other                                    Assets                                                                                                                      |   |                                                     | 34,681        |                                                    |   | 39,061 |   |
|                                                                                                                                                                 |   |                                                     |          |                                                    |   |   |   |
|                                                                                                                                                                 |   |                                                     |          |                                                    |   |   |   |
|                                                                                                                                                                 |   |                                                     |          |                                                    |   |   |   |
|                                                                                                                                                                 |   |                                                     |          |                                                    |   |   |   |
| **Total                                    Assets**                                                                                                                  |   | **$**                                                    | **8,443,501** |                                                    | **$**  | **8,153,396** |   |

| **Liabilities                                    and Shareholders' Equity**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   | **December                                    31, 2005** |          | **June                                    30,****2005** |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------|---------------|---------------------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   | (Unaudited)                                              |          |                                                    |   |
| Current                                    Liabilities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                                                     |          |                                                    |   |
| Current                                    portion of long-term debt                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   | $                                                        | 778,517       |                                                    | $      | 674,585 |   |
| Accounts                                    payable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                                     | 1,145,883     |                                                    |   | 1,339,251 |   |
| Accrued                                    expenses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                                     | 1,443,059     |                                                    |   | 1,361,514 |   |
|  **Total                                    current liabilities**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                                                     | 3,367,459     |                                                    |   | 3,375,350 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                                     |          |                                                    |   |   |   |
|  Deferred                                    Rent                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                                                     | 93,305        |                                                    |   | 115,415 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                                     |          |                                                    |   |   |   |
|  **Total                                    liabilities**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                                                     | 3,460,764     |                                                    |   | 3,490,765 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                                     |          |                                                    |   |   |   |
| Shareholders’                                    Equity:Preferred                                    stock - $.01 par value; authorized 5,000,000                                    shares, none                                    issuedCommon                                    stock, $.01 par value; authorized 30,000,000                                    shares, issued and                                    outstanding 9,568,217 and 9,407,717 shares atDecember 31, 2005, and                                    June 30, 2005, respectively |   |                                                     | 95,682        |                                                    |   | 94,077 |   |
| Common                                    stock warrants                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                                     | 19,800        |                                                    |   | 19,800 |   |
| Paid-in                                    capital in excess of par                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                                     | 11,759,962    |                                                    |   | 11,641,821 |   |
| Accumulated                                    deficit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                                                     | (6,892,707    | )                                                       |   | (7,093,067 | ) |
| **Total                                    shareholders’ equity**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                                                     | 4,982,737     |                                                    |   | 4,662,631 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                                     |          |                                                    |   |   |   |
| **Total                                    Liabilities and Shareholders’**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                                                     |          |                                                    |   |   |   |
| **Equity**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | **$**                                                    | **8,443,501** |                                                    | **$**  | **8,153,396** |   |

----

**AFP        Imaging Corporation and Subsidiaries**

**Consolidated        Statements of Operations**

|                                                          |   | **Three                  Months Ended****December                  31,** |          | **Six                  Months Ended****December                  31,** |   |
|---------------------------------------------------------------|--------|--------------------------------------------------------------------------|---------------|------------------------------------------------------------------------|--------|
|                                                          |   | **2005**                                                                 |          | **2004**                                                               |   | **2005** |   | **2004** |   |
|                                                          |   |                                                                     |          |                                                                   |   |   |   |   |   |
| **Net                  sales**                                |   | **$**                                                                    | **6,359,879** |                                                                   | **$**  | **6,082,235** |   | **$** | **11,489,993** |   | **$** | **10,737,706** |   |
|                                                          |   |                                                                     |          |                                                                   |   |   |   |   |   |   |   |   |   |
| Cost                  of sales                                |   |                                                                     | 3,807,489     |                                                                   |   | 3,612,309 |   |   | 7,090,085 |   |   | 6,519,988 |   |
|                                                          |   |                                                                     |          |                                                                   |   |   |   |   |   |   |   |   |   |
| Gross                  profit                                 |   |                                                                     | 2,552,390     |                                                                   |   | 2,469,926 |   |   | 4,399,908 |   |   | 4,217,718 |   |
|                                                          |   |                                                                     |          |                                                                   |   |   |   |   |   |   |   |   |   |
| Selling,                  general and administrative expenses |   |                                                                     | 2,024,073     |                                                                   |   | 1,879,048 |   |   | 3,799,647 |   |   | 3,555,473 |   |
| Research                  and development expenses            |   |                                                                     | 189,894       |                                                                   |   | 89,886 |   |   | 344,579 |   |   | 178,585 |   |
|                                                          |   |                                                                     | 2,213,967     |                                                                   |   | 1,968,934 |   |   | 4,144,226 |   |   | 3,734,058 |   |
|                                                          |   |                                                                     |          |                                                                   |   |   |   |   |   |   |   |   |   |
| Operating                  income                             |   |                                                                     | 338,423       |                                                                   |   | 500,992 |   |   | 255,682 |   |   | 483,660 |   |
|                                                          |   |                                                                     |          |                                                                   |   |   |   |   |   |   |   |   |   |
|                                                          |   |                                                                     |          |                                                                   |   |   |   |   |   |   |   |   |   |
| Interest                  expense, net                        |   |                                                                     | 28,167        |                                                                   |   | 39,123 |   |   | 55,322 |   |   | 82,308 |   |
|                                                          |   |                                                                     |          |                                                                   |   |   |   |   |   |   |   |   |   |
| Income                  before provision for income taxes     |   |                                                                     | 310,256       |                                                                   |   | 461,869 |   |   | 200,360 |   |   | 401,352 |   |
|                                                          |   |                                                                     |          |                                                                   |   |   |   |   |   |   |   |   |   |
| Provision                  for income taxes                   |   |                                                                     | –       |                                                                   |   | 4,845 |   |   | – |   |   | 15,940 |   |
|                                                          |   |                                                                     |          |                                                                   |   |   |   |   |   |   |   |   |   |
| **Net                  income**                               |   | **$**                                                                    | **310,256**   |                                                                   | **$**  | **457,024** |   | **$** | **200,360** |   | **$** | **385,412** |   |
|                                                          |   |                                                                     |          |                                                                   |   |   |   |   |   |   |   |   |   |
|                                                          |   |                                                                     |          |                                                                   |   |   |   |   |   |   |   |   |   |
| Net                  income per common share:                 |   |                                                                     |          |                                                                   |   |   |   |   |   |   |   |   |   |
| Basic                                                         |   | $                                                                        | .03           |                                                                   | $      | .05 |   | $ | .02 |   | $ | .04 |   |
| Diluted                                                       |   | $                                                                        | .03           |                                                                   | $      | .05 |   | $ | .02 |   | $ | .04 |   |
|                                                          |   |                                                                     |          |                                                                   |   |   |   |   |   |   |   |   |   |
| Weighted                  average outstanding common stock:   |   |                                                                     |          |                                                                   |   |   |   |   |   |   |   |   |   |
| Basic                                                         |   |                                                                     | 9,568,217     |                                                                   |   | 9,399,702 |   |   | 9,553,796 |   |   | 9,360,507 |   |
| Diluted                                                       |   |                                                                     | 10,021,838    |                                                                   |   | 9,832,886 |   |   | 10,054,972 |   |   | 9,860,553 |   |

----

**AFP        Imaging Corporation and Subsidiaries**

**Consolidated        Statements of Shareholders' Equity**

**For        the Six Months Ended December 31, 2005 and 2004**

|                                                                                                                          |   | **CommonStock** |       | **Common                  StockWarrants** |   | **Paid-inCapital                  InExcess of Par** |   | **Deficit** |           | **Total** |   |
|-------------------------------------------------------------------------------------------------------------------------------|--------|-----------------|------------|-------------------------------------------|--------|-----------------------------------------------------|--------|-------------|----------------|-----------|--------|
| **Balance                  June 30, 2004**                                                                                    |   | **$**           | **92,710** |                                      | **$**  | **19,800**                                          |   | **$**       | **11,545,883** |      | **$**  | **(8,992,997** | **)** | **$** | **2,665,396** |   |
|                                                                                                                          |   |            |       |                                      |   |                                                |   |        |           |      |   |   |   |   |   |   |
| Issuance                  of 129,000 shares of common stock in connection with the exercise                  of stock options |   |            | 1,287      |                                      |   | –                                             |   |        | 38,818         |      |   | – |   |   | 40,105 |   |
|                                                                                                                          |   |            |       |                                      |   |                                                |   |        |           |      |   |   |   |   |   |   |
| Net                  income for six months                                                                                    |   |            |       |                                      |   |                                                |   |        |           |      |   |   |   |   |   |   |
| ended                  December 31, 2004                                                                                      |   |            | –    |                                      |   | –                                             |   |        | –        |      |   | 385,412 |   |   | 385,412 |   |
| **Balance                  December 31, 2004**                                                                                |   | **$**           | **93,997** |                                      | **$**  | **19,800**                                          |   | **$**       | **11,584,701** |      | **$**  | **(8,607,585** | **)** | **$** | **3,090,913** |   |
|                                                                                                                          |   |            |       |                                      |   |                                                |   |        |           |      |   |   |   |   |   |   |
| **Balance                  June 30, 2005**                                                                                    |   | **$**           | **94,077** |                                      | **$**  | **19,800**                                          |   | **$**       | **11,641,821** |      | **$**  | **(7,093,067** | **)** | **$** | **4,662,631** |   |
|                                                                                                                          |   |            |       |                                      |   |                                                |   |        |           |      |   |   |   |   |   |   |
| Issuance                  of 160,500 shares of common stock in connection with theexercise                  of stock options  |   |            | 1,605      |                                      |   | –                                             |   |        | 81,633         |      |   | – |   |   | 83,238 |   |
|                                                                                                                          |   |            |       |                                      |   |                                                |   |        |           |      |   |   |   |   |   |   |
| Stock-based                  compensation expense                                                                             |   |            | –    |                                      |   | –                                             |   |        | 36,508         |      |   | – |   |   | 36,508 |   |
|                                                                                                                          |   |            |       |                                      |   |                                                |   |        |           |      |   |   |   |   |   |   |
| Net                  income for six months                                                                                    |   |            |       |                                      |   |                                                |   |        |           |      |   |   |   |   |   |   |
| ended                  December 31, 2005                                                                                      |   |            | –    |                                      |   | –                                             |   |        | –        |      |   | 200,360 |   |   | 200,360 |   |
| **Balance                  December 31, 2005**                                                                                |   | **$**           | **95,682** |                                      | **$**  | **19,800**                                          |   | **$**       | **11,759,962** |      | **$**  | **(6,892,707** | **)** | **$** | **4,982,737** |   |

----

**AFP        Imaging Corporation and Subsidiaries**

**Consolidated        Statements of Cash Flows**

|                                                                                                                        |   | **Six                  months ended****December                  31,** |       |
|-----------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------|------------|
|                                                                                                                        |   | **2005**                                                               | ** ** | **2004** |   |
|                                                                                                                        |   |                                                                   |       |   |   |
| Cash                  flows from operating activities:                                                                      |   |                                                                   |       |   |   |
| Net                  income                                                                                                 |   | $                                                                      | 200,360    |   | $ | 385,412 |   |
| Adjustments                  to reconcile net loss to net cash (used by) provided by operating                  activities- |   |                                                                   |       |   |   |   |   |
| Depreciation                  and amortization                                                                              |   |                                                                   | 116,249    |   |   | 106,749 |   |
| Non-cash                  compensation expense                                                                              |   |                                                                   | 36,508     |   |   | – |   |
| Change                  in assets and liabilities:                                                                          |   |                                                                   |       |   |   |   |   |
| Decrease                  (increase) in accounts receivable                                                                 |   |                                                                   | 32,008     |   |   | (58,417 | ) |
| Decrease                  (increase) in inventories                                                                         |   |                                                                   | 569,830    |   |   | (206,684 | ) |
| Decrease                  in prepaid expenses and other assets                                                              |   |                                                                   | 14,786     |   |   | 134,194 |   |
| (Decrease)                  increase in accounts payable                                                                    |   |                                                                   | (193,368   | ) |   | 77,985 |   |
| Increase                  in accrued expenses                                                                               |   |                                                                   | 81,545     |   |   | 260,209 |   |
| (Decrease)                  in deferred rent                                                                                |   |                                                                   | (22,110    | ) |   | (10,176 | ) |
|                                                                                                                        |   |                                                                   |       |   |   |   |   |
| Total                  adjustments                                                                                          |   |                                                                   | 635,448    |   |   | 303,860 |   |
|                                                                                                                        |   |                                                                   |       |   |   |   |   |
| **Net                  cash provided by operating activities**                                                              |   |                                                                   | 835,808    |   |   | 689,272 |   |
|                                                                                                                        |   |                                                                   |       |   |   |   |   |
| Cash                  flows from investing activities:                                                                      |   |                                                                   |       |   |   |   |   |
| Purchases                  of property and equipment                                                                        |   |                                                                   | (130,298   | ) |   | (109,928 | ) |
|                                                                                                                        |   |                                                                   |       |   |   |   |   |
| **Net                  cash used in investing activities**                                                                  |   |                                                                   | (130,298   | ) |   | (109,928 | ) |
|                                                                                                                        |   |                                                                   |       |   |   |   |   |
| Cash                  flow from financing activities:                                                                       |   |                                                                   |       |   |   |   |   |
| Borrowing                  of debt                                                                                          |   |                                                                   | 237,265    |   |   | – |   |
| Repayment                  of debt                                                                                          |   |                                                                   | (133,333   | ) |   | (385,344 | ) |
| Proceeds                  from exercise of common stock options                                                             |   |                                                                   | 83,238     |   |   | 40,105 |   |
|                                                                                                                        |   |                                                                   |       |   |   |   |   |
| **Net                  cash provided by (used in) financing activities**                                                    |   |                                                                   | 187,170    |   |   | (345,239 | ) |
|                                                                                                                        |   |                                                                   |       |   |   |   |   |
| Net                  increase in cash and cash equivalents                                                                  |   |                                                                   | 892,680    |   |   | 234,105 |   |
|                                                                                                                        |   |                                                                   |       |   |   |   |   |
| Cash                  and cash equivalents, at beginning of period                                                          |   |                                                                   | 331,009    |   |   | 331,993 |   |
|                                                                                                                        |   |                                                                   |       |   |   |   |   |
| Cash                  and cash equivalents, at end of period                                                                |   | $                                                                      | 1,223,689  |   | $ | 566,098 |   |
|                                                                                                                        |   |                                                                   |       |   |   |   |   |
| **Supplemental                  cash flow disclosures:**Cash                  paid during the periods for-                  |   |                                                                   |       |   |   |   |   |
| Interest                                                                                                                    |   | $                                                                      | 57,417     |   | $ | 85,209 |   |
| Income                  taxes, net of refunds                                                                               |   |                                                                   | ($1,537    | ) | $ | 35,940 |   |

----

**AFP      Imaging Corporation and Subsidiaries**

**Notes      to Consolidated Financial Statements**

**December      31, 2005**

**(1)      **
**Genera**
**l:**

**(2)      **
**Stock      Option Plans:**

*Share      Based Payment*
*Accounting      for Stock Issued to Employees*

|                                                                                                                          |   | **Three                months ended****December                31, 2004** |    | **Six                months ended****December                31, 2004** |   |
|-------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------|---------|-------------------------------------------------------------------------|--------|
| Net                income, as reported                                                                                        |   | $                                                                         | 457,024 |                                                                    | $      | 385,412 |   |
| Deduct:                Stock-based compensation expense determined underfair                value based method for all awards |   |                                                                      | (7,633  | )                                                                       |   | (15,801 | ) |
| Pro                forma net loss                                                                                             |   | $                                                                         | 449,391 |                                                                    | $      | 369,611 |   |
|                                                                                                                          |   |                                                                      |    |                                                                    |   |   |   |
| Basic                net loss per share amounts:                                                                              |   |                                                                      |    |                                                                    |   |   |   |
| As                reported                                                                                                    |   | $                                                                         | .05     |                                                                    | $      | .04 |   |
| Pro                forma                                                                                                      |   | $                                                                         | .05     |                                                                    | $      | .04 |   |
|                                                                                                                          |   |                                                                      |    |                                                                    |   |   |   |
| Diluted                net loss per share amounts:                                                                            |   |                                                                      |    |                                                                    |   |   |   |
| As                reported                                                                                                    |   | $                                                                         | .05     |                                                                    | $      | .04 |   |
| Pro                forma                                                                                                      |   | $                                                                         | .05     |                                                                    | $      | .04 |   |

----

|                                          |       | **Three                months ended December 31** | ** **              | **Six                months ended December 31** | ** ** |
|-----------------------------------------------|------------|---------------------------------------------------|-------------------------|-------------------------------------------------|------------|
| ** **                                    | ** ** | **2005**                                          | ** **              | **2004**                                        | ** ** | **2005** | ** ** | **2004** |   |
| Expected                volatility            |       |                                              | 153                     | %                                               |       | 80 | % |   | 153%                - 155% | % |   | 80 | % |
| Expected                lives from grant date |       |                                              | 10                years |                                            |       | 10                years |   |   | 10                years |   |   | 10                years |   |
| Expected                dividend yield        |       |                                              | 0                       | %                                               |       | 0 | % |   | 0 | % |   | 0 | % |
| Risk-free                interest rate        |       |                                              | 4.56                    | %                                               |       | 4.16 | % |   | 4.19%                - 4.56 | % |   | 4.04%                - 4.16 | % |

| Six                months ended December 31,                        | **2005**            | **2004**                         |
|---------------------------------------------------------------------|---------------------|----------------------------------|
| ** **                                                          | **Options**         | **Weighted****average****price** | **Options** | **Weighted****average****price** |
| Outstanding,                beginning of fiscal year                |  948,400  | $.76                             | 1,008,500  | $.57 |
| Exercised                                                           | (160,500)           | .52                              | (129,100) | .31 |
| Granted                                                             | 20,000         | 1.96                             | 20,000  | 1.26 |
| Forfeited                                                           | 0              | 0                                | (5,000) | .98 |
| Expired                                                             | 0              | 0                                | (57,000) | .31 |
| Outstanding,                end of period                           | 807,900        | $.84                             | 837,400  | $.64 |
| Exercisable                at December 31,                          | 807,900        |                             | 537,400  |   |
| Weighted                average fair value of  options granted | $1.94          |                             |   | $.79                  $.79 |

|                                                |   |                                                                             |    | ** Options                  Outstanding**                                                                                   |   | ** Options                  Exercisable**                               |   |
|-----------------------------------------------------|--------|----------------------------------------------------------------------------------|---------|----------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------|--------|
|  **Range                  of Exercise Prices** |   | **Number                  Exercisable****at                  December 31, 2005** |    | **Weighted-average                     Remaining   ****Contractual                  Life (Years)** |   | **Weighted-average                    Exercise Price  ** |   | **Number                  Exercisable****at                  December 31,****2005** |   |  **Weighted-average                  Exercise Price** |   |
| $.11                  - $.50                        |   |                                                                             | 396,000 |                                                                                                                             |   | 4.17                                                                         |   | $ | .30 |   |   | 396,000 |   | $ | .30 |   |
| $.53                  - $.81                        |   |                                                                             | 25,500  |                                                                                                                             |   | 4.44                                                                         |   |   | .61 |   |   | 25,500 |   |   | .61 |   |
| $1.06                  - $1.75                      |   |                                                                             | 348,400 |                                                                                                                             |   | 8.74                                                                         |   |   | 1.33 |   |   | 348,400 |   |   | 1.33 |   |
| $1.90                  - $2.26                      |   |                                                                             | 38,000  |                                                                                                                             |   | 6.14                                                                         |   |   | 2.05 |   |   | 38,000 |   |   | 2.05 |   |
|                                                |   |                                                                             | 807,900 |                                                                                                                             |   | 6.24                                                                         |   | $ | .84 |   |   | 807,900 |   | $ | .84 |   |

----

**(**
**3)      Per Share Data**
**:**

|                          |       | **Three                months ended December 31,** | ** ** | **Six                months ended December 31,** | ** ** |
|-------------------------------|------------|----------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                    | ** ** | **2005**                                           | ** ** | **2004**                                         | ** ** | **2005** | ** ** | **2004** |   |
| Basic                Shares   |       |                                               | 9,568,217  |                                             |       | 9,399,702 |   |   | 9,553,796 |   |   | 9,360,507 |   |
| Dilutive:                     |       |                                               |       |                                             |       |   |   |   |   |   |   |   |   |
| Options                       |       |                                               | 370,116    |                                             |       | 357,426 |   |   | 416,146 |   |   | 423,126 |   |
| Warrants                      |       |                                               | 83,505     |                                             |       | 75,758 |   |   | 85,030 |   |   | 76,920 |   |
| Diluted                Shares |       |                                               | 10,021,838 |                                             |       | 9,832,886 |   |   | 10,054,972 |   |   | 9,860,553 |   |

**(4)      Long and Short Term Debt**
**:**

**(5)      **
**Inventory**
**:**

|                                                 |       | ** December                31, 2005** | ** ** | ** June                30, 2005** | ** ** |
|------------------------------------------------------|------------|--------------------------------------------|------------|----------------------------------------|------------|
| ** **                                           | ** ** | **(Unaudited)**                            |       |                                   |       |
| Raw                materials and sub-component parts |       | $                                          | 1,704,450  |                                   | $          | 1,721,165 |   |
| Work-in-process                and finished goods    |       |                                       | 1,647,103  |                                   |       | 2,200,218 |   |
|                                                 |       | $                                          | 3,351,553  |                                   | $          | 3,921,383 |   |

**(6)      **
**Income      Taxes**
**:**

----

**(7)**
**Commitments      and Contingencies:**

**(8)**
** **
**New      Accounting Standards:**

*Accounting      Changes and Error Corrections *
*Accounting      Changes*
*Reporting      Accounting Changes in Interim Financial Statements*

----

**Item      2: Management's Discussion and Analysis of Financial Condition and Results      of      Operation**

**Capital      Resources and Liquidity**

----

**Results      of Operations - Six Months Fiscal 2006 Versus Six Months Fiscal      2005**

**Results      of Operations - Second Quarter Fiscal 2006 Versus Second Quarter Fiscal      2005**

----

**Critical      Accounting Policies and Estimates**

----

----

**Item      3: Quantitative and Qualitative Disclosures About Market      Risk**

**Item      4: Controls and Procedures.**

----

**Part      II Other Information**

**Item      1: Legal Proceedings**
**.**

**Item      2: Unregistered Sales in Equity Securities and Uses of      Proceeds**
**.**

**Item      3: Defaults Upon Senior Securities**
**.**

**Item      4: Submission of Matters to a Vote of Security Holders**
**.**

|                                |   | **For                  Election     ** | ** ** | **Against                  Election     ** |   |
|-------------------------------------|--------|-----------------------------------------------------------------|------------|---------------------------------------------------------------------|--------|
| David                  Vozick       |   |                                                            | 9,015,592  |                                                                |   | 16,850 |   |
| Donald                  Rabinovitch |   |                                                            | 9,030,292  |                                                                |   | 2,150 |   |
| Jack                  Becker        |   |                                                            | 9,030,292  |                                                                |   | 2,150 |   |
| Robert                  Blatt       |   |                                                            | 9,030,292  |                                                                |   | 2,150 |   |

**Item      5: Other Information**
**.**

**Item      6:**
**Exhibits**
**.**

| (a)   | Exhibits: |
|-----------------|-----------|

| (1)   | 31.1,                31.2, 31.3 - Certifications pursuant to Exchange Act Rule 13a - 14                (a). |
|-----------------|-------------------------------------------------------------------------------------------------------------|

| (2)   | 32.1,                32.2, 32.3 - Certifications pursuant to 18 U.S.C. Section 1350 of                the                Sarbanes - Oxley Act of 2002. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Signatures**

|         |                                                                                                                           |                                |
|--------------|--------------------------------------------------------------------------------------------------------------------------------|-------------------------------------|
|         | **AFP              IMAGING CORPORATION**                                                                                       |
|    |                                                                                                                      |                           |
|         | By:                                                                                                                  | /s/               David Vozick |
|         | Chairman                of the Board(Co-Principal Executive Officer)Secretary,                TreasurerDate: February 14, 2006 |
|         |                                                                                                                           |

|         |                                                             |                                        |
|--------------|------------------------------------------------------------------|---------------------------------------------|
|         |                                                             |
|    |                                                        |                                   |
|         | By:                                                    | /s/                 Donald Rabinovitch |
|         | President(Co-Principal Executive Officer)Date: February 14, 2006 |
|         |                                                             |

|         |                                                                                       |                                    |
|--------------|--------------------------------------------------------------------------------------------|-----------------------------------------|
|         |                                                                                       |
|    |                                                                                  |                               |
|         | By:                                                                              | /s/                   Elise Nissen |
|         | Chief Financial Officer(Principal Financial and Accounting Officer)Date: February 14, 2006 |
|         |                                                                                       |

----