<PAGE>

                                  UNITED STATES
                       SECURITIES 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 September 30, 2001

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                           (IRS Employer
      incorporation or organization)                         Identification No.)


          250 Clearbrook Road, Elmsford, New York                  10523
          ----------------------------------------               ----------
          (Address of principal executive offices)               (Zip Code)

Registrant's telephone number: 914-592-6100 (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 [ ]

The registrant had 9,271,054 shares of Common Stock outstanding as of November
1, 2001.


<PAGE>


This Quarterly Report on Form 10-Q contains certain forward-looking statements
within the meaning of the Private Securities Reform Act of 1995. Forward-looking
statements involve known and unknown risks and uncertainties and other factors
that could cause actual results of AFP Imaging Corporation (collectively with
its subsidiaries, the "Company") or achievements expressed or implied by such
forward-looking statements to not occur, not be realized or differ materially
from that stated in such forward-looking statements. Forward-looking statements
may be identified by terminology such as "may", "will", "project", "expect",
"believe", "estimate", "anticipate", "intend", "continue", "potential",
"opportunity" or similar terms, variations of such terms, or the negative of
such terms or variations. Potential risks, uncertainties and factors include,
but are not limited to, adverse changes in general economic conditions, the
economic, political and social impact of the September 2001 terrorist attacks on
the United States, and the resulting ability of the Company to transact its
business in a timely and efficient manner, the Company's ability to repay its
loans 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, increased competition, pricing pressures,
risks associated with foreign operations, the Company's ability to attract and
retain key personnel, difficulties in obtaining adequate long-term financing to
meet the Company's obligations, changes in the nature or enforcement of laws and
regulations concerning the Company's products, services, suppliers, or the
Company's customers, changes in currency exchange rates and regulations, and
other factors set forth in this Quarterly Report on Form 10-Q.


                          PART I. Financial Information

The consolidated financial statements included herein have been prepared by the
Company without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. While certain information and footnote disclosures
normally included in financial statements prepared in accordance with United
States generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, the Company believes that the
disclosures made herein are adequate to make the information presented not
misleading. It is recommended that these consolidated financial statements be
read in conjunction with the Company's consolidated financial statements and
notes thereto included in the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 2001.

In the opinion of the Company, all adjustments necessary to present fairly the
Company's consolidated financial position as of September 30, 2001 and June 30,
2001, and the results of its operations for the three month periods ended
September 30, 2001 and 2000, and its cash flows for the three months periods
then ended, have been included.


                                       2
<PAGE>

Item 1:  FINANCIAL STATEMENTS

                    AFP Imaging Corporation and Subsidiaries
       Consolidated Balance Sheets - September 30, 2001 and June 30, 2001


Assets                                   September 30,           June 30,
------                                      2001                   2001
                                        -----------           ------------
                                        (Unaudited)
Current Assets:
   Cash and cash equivalents            $   237,129           $    198,276
   Accounts receivable, less allowance
     for doubtful accounts of $88,000
       and $110,000, respectively         2,656,401              2,676,546
   Inventories                            2,982,450              3,488,217
   Prepaid expenses and other               122,267                130,720
                                        -----------           ------------
     Total current assets                 5,998,247              6,493,759
                                        -----------           ------------

Property and Equipment (at cost)          3,009,837              3,359,204
Less accumulated depreciation            (2,453,358)            (2,748,726)
                                        -----------           ------------
                                            556,479                610,478

Intangible Assets,
     net of accumulated amortization      1,405,069              1,441,069

Other Assets                                242,515                 89,908
                                        -----------           ------------
                                        $  8,202,310          $  8,635,214
                                        ============          ============


 Liabilities and Shareholders' Equity             September 30,      June 30,
 ------------------------------------                 2001             2001
                                                  -------------    ------------
                                                   (Unaudited)
Current Liabilities:
   Current portion of long-term debt               $    212,500    $    141,667
   Accounts payable                                     912,646         982,825
   Accrued expenses                                     977,179         920,518
                                                   ------------    ------------
     Total current liabilities                        2,102,325       2,045,010
                                                   ------------    ------------
Long Term Debt                                        3,230,314       3,872,981
                                                   ------------    ------------
Shareholders' Equity
  Common stock, $.01 par value, 30,000,000
     shares authorized, 9,271,054 shares
     issued and outstanding at September 30,
     2001, and June 30, 2001, respectively               92,710          92,710
  Common stock warrants                                  19,800            --
  Paid-in capital in excess of par                   11,545,883      11,545,883
  Accumulated deficit                                (8,777,076)     (8,907,059)
  Cumulative translation adjustment                     (11,646)        (14,311)
                                                   ------------    ------------
      Total shareholders' equity                      2,869,671       2,717,223
                                                   ------------    ------------

                                                   $  8,202,310    $  8,635,214
                                                   ============    ============


                 The accompanying notes to financial statements
                   are an integral part of these statements.


                                       3
<PAGE>

                    AFP Imaging Corporation and Subsidiaries
                      Consolidated Statements of Operations
                                   (Unaudited)

                                                        Three Months Ended
                                                           September 30,
                                                     ---------------------------
                                                        2001             2000
                                                     ----------       ----------

Net sales                                            $5,129,443       $7,077,984

Cost of sales                                         3,374,538        4,898,636
                                                     ----------       ----------

     Gross profit                                     1,754,905        2,179,348
Selling, general and
  administrative expenses                             1,408,818        1,798,249
Research and development                                 98,761          101,010
                                                     ----------       ----------
                                                      1,507,579        1,899,259
                                                     ----------       ----------
     Operating income                                   247,326          280,089

Interest, net                                           101,029          126,026
                                                     ----------       ----------
Income before provision for taxes                       146,297          154,063

Provision for income taxes                               16,314           13,430
                                                     ----------       ----------

Net income                                           $  129,983       $  140,633
                                                     ==========       ==========

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

Weighted average outstanding
  common stock
     Basic                                            9,271,054        9,271,054
                                                     ==========       ==========
     Diluted                                          9,271,285        9,450,095
                                                     ==========       ==========


           The accompanying notes to conslidated financial statements
                   are an integral part of these statements.

                                       4
<PAGE>

                    AFP Imaging Corporation and Subsidiaries
    Consolidated Statements of Shareholders' Equity and Comprehensive Income
             For the Three Months Ended September 30, 2001 and 2000

                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                                                          Foreign
                                                                 Common      Paid-in                     Currency
                                 Comprehensive     Common         Stock     Capital In     Accumulated  Translation
                                     Income        Stock        Warrants   Excess of Par    Deficit       Adjustment      Total
                                  -----------   -----------   -----------  -------------  -----------    -----------    -----------
<S>                               <C>           <C>           <C>           <C>           <C>            <C>            <C>
Balance June 30, 2000             $        --   $    92,710   $        --   $11,545,883   $(7,168,713)   $   (14,941)   $ 4,454,939

  Foreign currency translation
     adjustment                           823            --            --            --            --            823            823

  Net income for three months
     ended September 30, 2000         140,633            --            --            --       140,633                       140,633
                                  -----------   -----------   -----------  -------------  -----------    -----------    -----------


Comprehensive Income              $   141,456            --            --            --            --             --             --
                                  -----------   -----------   -----------  -------------  -----------    -----------    -----------
Balance September 30, 2000                      $    92,710   $        --   $11,545,883   $(7,028,080)   $   (14,118)   $ 4,596,395
                                                ===========   ===========   ===========   ===========    ===========    ===========


Balance June 30, 2001             $        --   $    92,710   $        --   $11,545,883   $(8,907,059)   $   (14,311)   $ 2,717,223

  Issuance of common stock
     warrants                              --            --        19,800            --            --             --         19,800

  Foreign currency translation
     adjustment                         2,665            --            --            --            --          2,665          2,665

  Net income for three months
     ended September 30, 2001         129,983            --            --            --       129,983             --        129,983
                                  ===========   ===========   ===========   ===========   ===========    ===========    ===========

Comprehensive Income              $   132,648
                                  ===========
Balance September 30, 2001                      $    92,710   $    19,800   $11,545,883   $(8,777,076)   $   (11,646)   $ 2,869,671
                                                ===========   ===========   ===========   ===========    ===========    ===========
</TABLE>



           The accompanying notes to conslidated financial statements
                   are an integral part of these statements.


                                       5
<PAGE>

                    AFP Imaging Corporation and Subsidiaries
                      Consolidated Statements of Cash Flows
             For the Three Months Ended September 30, 2001 and 2000
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                    2001            2000
                                                                -----------    -----------
<S>                                                             <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net lncome                                                 $   129,983    $   140,633
     Adjustments to reconcile net income to net cash provided
       by operating activities-
         Depreciation and amortization                               90,000        201,859
         Change in assets and liabilities:
           Decrease (increase) in accounts receivable                20,145       (117,202)
           Decrease in inventories                                  164,952        222,093
           (Increase) decrease in prepaid expenses
           and other assets                                        (104,555)       230,593
           (Decrease) in accounts payable                           (70,179)      (244,578)
           Increase (decrease) in accrued expenses                   56,661        (94,004)
                                                                -----------    -----------

         Total adjustments                                          157,024        198,761
                                                                -----------    -----------
         Net cash provided by operating activities                  287,007        339,394
                                                                -----------    -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
         Proceeds from sale of graphic arts business                340,815             --
         Capital expenditures                                            --        (40,307)
                                                                -----------    -----------

         Net cash provided by (used by) investing activities        340,815        (40,307)
                                                                -----------    -----------

CASH FLOW FROM FINANCING ACTIVITIES:
         Issuance of common stock warrants                          (19,800)            --
         Borrowing of debt                                        1,801,065             --
         Repayment of debt                                       (2,372,899)      (588,283)
                                                                -----------    -----------

         Net cash used by financing activities                     (591,634)      (588,283)
                                                                -----------    -----------

EXCHANGE RATE EFFECTS ON CASH AND CASH EQUIVALENTS                    2,665            823
                                                                -----------    -----------

         Net increase (decrease) in cash and cash equivalents        38,853       (288,373)

CASH AND CASH EQUIVALENTS, at beginning of period                   198,276        433,620
                                                                -----------    -----------

CASH AND CASH EQUIVALENTS, at end of period                     $   237,129    $   145,247
                                                                ===========    ===========
</TABLE>


The accompanying notes to consolidated financial statements are an integral part
                       of these consolidated statements.


                                       6
<PAGE>

                    AFP Imaging Corporation and Subsidiaries
                   Notes to Consolidated Financial Statements
                               September 30, 2001
                                   (Unaudited)

(1) General:
The accounting policies followed during the interim periods reported on herein
are in conformity with accounting principles generally accepted in the United
States and are consistent with those applied for annual periods, as described in
the Company's financial statements included in the Company's Annual Report on
Form 10-K for the year ended June 30, 2001.

(2) Net Earnings Per Common Share:
The diluted weighted average number of shares outstanding includes 231 and
179,041 shares of common stock respectively, issuable upon exercise of
outstanding stock options in the Fiscal 2002 quarter and Fiscal 2001 quarter.

(3) Long and Short Term Debt:
As of September 21, 2001, the Company established a new senior secured credit
facility (the "Revolving Credit Loan"), consisting of a $3.5 million revolving
line of credit, to replace its then current senior secured credit facility,
which would have expired on October 31, 2001. The Revolving Credit Loan is
secured by all of the Company's inventory, accounts receivable, equipment, life
insurance policies and proceeds thereof, trademarks, licenses, patents and
general intangibles. The Revolving Credit Loan requires that certain financial
ratios and net worth amounts be maintained. This new Revolving Credit Loan
resulted in a decrease in the maximum amount of loan available under the
revolving line of credit, an interest rate increase to 1-3/4% over the prime
rate, a stricter formula to calculate available funds based on eligible accounts
receivable and inventory, and additional reporting requirements to the senior
secured lender, than under the Company's former credit facility. The Revolving
Credit Loan provides for decreases in the interest rate charged on monies
outstanding, currently at 7-1/4% per year, under specified circumstances. In
connection with the Revolving Credit Facility, the Company issued a 5-year
warrant to the lender for the purchase of 100,000 shares of the Company's common
stock at $.32 per share, subject to an adjustment for all issuances of stock.

Upon execution of the new Revolving Credit Loan, the Company utilized the
proceeds to repay the former credit facility's revolver balance of $1,801,000 at
September 21, 2001. The Company is dependent upon the Revolving Credit Loan to
finance its overall operations. It is believed that the new Revolving Credit
Loan is sufficient to finance the Company's ongoing working capital requirements
for the foreseeable future. At October 31, 2001, the Company had available
$915,900 of unused credit under the Revolving Credit Loan.

(4) Inventory:
The Company uses the gross margin method related to labor and overhead costs
during interim periods for inventory valuation. Inventory is stated at the lower
of cost (first-in, first-out) or market (net realizable value).

(5) Income Taxes:
The Company's income tax provision for the Fiscal 2002 and 2001 quarters,
relates to state and foreign income or capital taxes net of any refunds
received. No income tax benefits related to the losses reported in Fiscal 2001
and 2000 have been recorded, in accordance with SFAS No. 109.

(6) Sale of Graphic Arts Division:
On July 30, 2001, the Company sold its graphic arts business and selected
related assets to a third party for approximately $350,000, comprised of cash
and a note receivable. Included in these assets was approximately $329,000 of
fully depreciated assets. All costs associated with the disposition of this
business segment were accrued as of June 30, 2001.

(7) Segment Information:
As of September 30, 2001, the Company only had one business segment,
Medical/Dental. The segment information for the three months ended September 30,
2000 is shown below. Segment information related to operating income includes
costs directly attributable to each segment's operations.


                                       7
<PAGE>

<TABLE>
<CAPTION>
                                                                          Depreciation                     Net
                                                  Operating                    &            Capital      Interest
                                   Net Sales       Income        Assets   Amortization   Expenditures    Expense
                                  ----------      --------    -----------    --------       -------      --------
     <S>                          <C>             <C>         <C>            <C>            <C>          <C>
     For the three months ended
       September 30, 2000
       Medical/Dental             $6,309,339      $227,086    $ 9,932,301    $201,859       $40,307      $106,026
       Graphic Arts                  768,645        53,003        890,195           0             0        20,000
                                  ----------      --------    -----------    --------       -------      --------
       Consolidated               $7,077,984      $280,089    $10,822,496    $201,859       $40,307      $126,026
                                  ==========      ========    ===========    ========       =======      ========
</TABLE>

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

Capital Resources and Liquidity

At the present time, the Company is not able to fully evaluate the effects of
the tragic terrorist attacks on the United States on September 11, 2001, the
resulting uncertainty caused in the worldwide markets, and the ability of the
Company to transact its business in a timely and efficient manner.

The Company's working capital at September 30, 2001 decreased by approximately
$552,800 from June 30, 2001. The Company sold inventory as well as selected
other assets associated with its graphic arts business for cash and a note
receivable and, used the proceeds of the transaction to reduce its long-term
revolver debt. The Company also reduced its borrowings under long-term debt by
reductions in accounts receivable, inventory (other than the sale mentioned
above), prepaid expenses and other assets, which was offset by decreases in
accounts payable. Additionally, as of September 30, 2001, included in the
current portion of long-term debt is nine months of principal payments due under
a subordinated note as opposed to six months of principal payments at June 30,
2001.

As of September 21, 2001, the Company established a new senior secured credit
facility (the "Revolving Credit Loan") consisting of a $3.5 million revolving
line of credit, to replace its then current senior secured credit facility,
which would have expired on October 31, 2001. The Revolving Credit Loan is
secured by all of the Company's inventory, accounts receivable, equipment, life
insurance policies and proceeds thereof, trademarks, licenses, patents and
general intangibles. The Revolving Credit Loan requires that certain financial
ratios and net worth amounts be maintained. This new Revolving Credit Loan
resulted in a decrease in the maximum amount of loan available under the
revolving line of credit, an interest rate increase to 1-3/4% over the prime
rate, a stricter formula to calculate available funds based on eligible accounts
receivable and inventory, and additional reporting requirements to the senior
secured lender, than under the Company's former credit facility. The Revolving
Credit Loan provides for decreases in the interest rate charged on monies
outstanding, currently at 7-1/4% per year, under specified circumstances. In
connection with the Revolving Credit Facility, the Company issued a 5-year
warrant to the lender for the purchase of 100,000 shares of the Company's common
stock at $.32 per share, subject to an adjustment for all issuances of stock.

Upon execution of the new Revolving Credit Loan, the Company utilized the
proceeds to repay the former credit facility's revolver balance of $1,801,000 at
September 21, 2001. The Company is dependent upon the Revolving Credit Loan to
finance its overall operations. It is believed that the new Revolving Credit
Loan is sufficient to finance the Company's ongoing working capital
requirements.

The Company's historical operating cash flows have been positive; however, the
Company is dependent upon the Revolving Credit Facility to finance its ongoing
operations. The Company expects its need for working capital requirements will
continue to be financed by operations and from borrowings. The Company is
presently unaware of any other trends, demands, commitments or contingencies
which are reasonably likely to result in a material increase or decrease in its
liquidity or capital resources in the foreseeable future. At October 31, 2001,
the Company had available $915,900 of unused credit under the Revolving Credit
Loan.

There were no capital expenditures during the first three months of Fiscal 2002.
The Company conserved all cash expenditures in anticipation of closing on the
Revolving Credit Loan in September 2001. The Company did not defer the purchase
of any significant capital items, and does not anticipate higher than normal
capital expenditures during the balance of Fiscal 2002. The Company expects to
continue to finance any future capital requirements principally from internally
generated funds. Future capital expenditures are limited under the terms of the
Revolving Credit Loan.


                                       8
<PAGE>

Results of Operations - Three Months Fiscal 2002 Versus Three Months Fiscal 2001

At the present time, the Company is not able to fully evaluate the effects of
the tragic terrorist attacks on the United States on September 11, 2001, the
resulting uncertainty caused in the worldwide markets, and the ability of the
Company to transact its business in a timely and efficient manner.

Sales decreased approximately $1,948,500 or 28% between the Fiscal 2002 and
Fiscal 2001 quarters. The dental products decreased approximately $1,474,400.
The Fiscal 2001 quarter included approximately $1.0 million more in sales to the
U.S. military than the Fiscal 2002 quarter. Panoramic X-ray sales and dental
processor sales decreased approximately $400,000 due to the postponement of
orders attributable to uncertainty in the market place, and a reduction in
export sales. Sales of graphic arts products showed a decrease from the prior
year's corresponding quarter of approximately $713,300 due to the sale of this
business segment on July 30, 2001. The Company's medical products showed an
increase of approximately $300,000 due to a sale to the U.S. military in the
Fiscal 2002 quarter. The Company's other products did not show a significant
variance from the prior fiscal year's first quarter.

Gross profit as a percent of sales increased approximately 3.4 percentage points
between the Fiscal 2002 and Fiscal 2001 quarters, due to changes in the product
mix. There were less distributor sales and more Company manufactured products in
the current fiscal quarter. Distributor product sales tend to have lower margins
than Company manufactured products. Labor and overhead costs were approximately
the same percentage of sales as the prior fiscal year's first quarter.

Selling, general, and administrative costs decreased approximately $389,400 or
21.7% between the Fiscal 2002 and Fiscal 2001 quarters. Approximately $180,000
of the decrease is due to costs associated with the graphic arts business
segment sold in July 2001. Approximately $76,000 relates to the collection in
the current fiscal quarter of a portion of a large receivable, which had been
written off in 1993. The balance of approximately $133,000 is attributable to
the cost reduction programs which management instituted in the fourth quarter of
Fiscal 2001. As indicated previously, the work force was reduced 11%, low margin
products were discontinued, and all non-essential expenditures were either
eliminated or significantly reduced, where possible. The associated benefits
were first realized in the first quarter of Fiscal 2002. Management continues to
seek ways to reduce fixed overhead costs and eliminate potential redundancies.

Research and development costs decreased approximately $2,200 or 2.2% between
the Fiscal 2002 and Fiscal 2001 quarters. This slight decrease is mainly
attributable to the sale of the graphic arts business in July 2001. The Company
has continued to focus on the refinement of its digital dental products in order
to introduce new products, reduce costs and maintain market share. The Company
continues to invest in sustaining engineering and related costs for its analog
products. Where applicable, the Company is acting as a master import distributor
for new products developed by others.

Interest expense, net decreased approximately $25,000 or 19.8% between the
Fiscal 2002 and Fiscal 2001 quarters. Total corporate borrowings were reduced by
similar amounts in the first quarters of Fiscal 2002 and Fiscal 2001; however,
there was approximately $1.1 million less in total debt at September 30, 2001
compared to September 30, 2000. Additionally, the interest rate was slightly
less in Fiscal 2002.

The income tax provisions for Fiscal 2002 and Fiscal 2001, respectively,
primarily reflect the nominal state taxes due. No tax benefit has been
recognized for the losses incurred in prior years

Other

Adoption of New Financial Standards
In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS No.
141 ("SFAS No. 141"), "Business Combinations" and SFAS No. 142 ("SFAS No. 142"),
"Goodwill and Other Intangible Assets." SFAS No. 141 requires that the purchase
method of accounting be used for all business combinations initiated after June
30, 2001, and prohibits the use of the pooling-of-interests method after that
date. SFAS No. 142 changes the accounting for goodwill from an amortization
method to an impairment only approach. The amortization of goodwill from past
business combinations will cease upon adoption of this statement on January 1,
2002. Goodwill and intangible assets acquired in business combinations completed
after June 30, 2001 must comply with the provisions of this statement. Companies
will also be required to evaluate all existing goodwill for impairment within
six months of adoption by comparing the fair value of each reporting unit to its
carrying value at the date of adoption. Any transitional impairment losses will
be recognized in the first interim period in the year of adoption and will be
recognized as the effect of a change in accounting principle. The Company is
evaluating the potential impact of adopting these pronouncements on the results
of operations and financial position.


                                       9
<PAGE>


In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations" (SFAS No. 143). SFAS No. 143 requires that legal obligations
associated with the retirement of tangible long-lived assets be recorded at fair
value when incurred and is effective beginning on July 1, 2002 for the Company.
The Company is currently reviewing the provisions of SFAS No. 143 to determine
the statement's impact upon adoption but does not expect it to have a material
effect on the Company's results of operations or financial position.

In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets" (SFAS No. 144). SFAS No. 144 requires that one
accounting model be used for long-lived assets to be disposed of by sale.
Discontinued operations will be measured similar to other long-lived assets
classified as held for sale at the lower of its carrying amount or fair value
less cost to sell. Future operating losses will no longer be recognized before
they occur. SFAS No. 144 also broadens the presentation of discontinued
operations to include a component entity when operations and cash flows can be
clearly distinguished, and establishes criteria to determine when a long-lived
asset is held for sale. The provisions of this statement will be effective
beginning July 1, 2002 for the Company. The Company is currently reviewing the
provisions of SFAS No. 144 to determine the statement's impact upon adoption but
does not expect it to have a material effect on the Company's results of
operations or financial position.

Item 3:   Quantitative and Qualitative Disclosures About Market Risk.

Not Applicable.


                            Part II Other Information


Item 1:    Legal Proceedings

Reference is made to Item 3 in the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 2001, and to the reference therein, for a discussion
of all material pending legal proceedings to which the Company and its
subsidiaries are parties.

Item 2:   Changes in Securities and Use of Proceeds.

In connection with the establishment of its new three-year, $3.5 million senior
secured revolving credit facility, as of September 21, 2001, the Company issued
to the new senior secured lender warrants to purchase up to 100,000 shares of
the Company's Common Stock, at an exercise price of $.32 per share. These
warrants, which expire on September 21, 2006, provide for "cashless exercise"
and are subject to anti-dilution adjustment. The Company has granted specific
"piggyback" registration rights with respect to the shares of the Company's
Common Stock issuable upon exercise of the warrants. The Company believes that
these securities were issued in a transaction not involving a public offering in
reliance upon an exemption from registration provided by Section 4(2) of the
Securities Act of 1933.

Item 3:    Defaults Upon Senior Securities.

None

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

None

Item 5:    Other Information.

None


                                       10
<PAGE>

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

  (a)      Exhibits:

           10.1 - Keltic Financial Partners LP Loan and Security Agreement and
           Keltic Financial Partners LP Revolving Note, both dated September 21,
           2001, incorporated by reference from the Exhibits filed with the
           Registrant's Annual Report on Form 10-K for the fiscal year ended
           June 30, 2001.

           10.2 - Common Stock Purchase Warrant issued to Keltic Financial
           Partners LP, incorporated by reference from the Exhibits filed with
           the Registrant's Annual Report on Form 10-K for the fiscal year ended
           June 30, 2001.

  (b)      Reports on Form 8-K:

           None


                                       11
<PAGE>


Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



                             AFP IMAGING CORPORATION


                             /s/ David Vozick
                             --------------------------------------------
                             David Vozick
                             Chairman of the Board
                             Secretary, Treasurer
                             Date:  November 13, 2001


                             /s/ Donald Rabinovitch
                             --------------------------------------------
                             Donald Rabinovitch
                             President and Director
                             (Principal Executive Officer)
                             Date:  November 13, 2001


                             /s/ Elise Nissen
                             --------------------------------------------
                             Elise Nissen
                             Chief Financial Officer
                             (Principal Financial and Accounting Officer)
                             Date:  November 13, 2001


                                       12