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 December 31, 2003

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_____

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes _____  No__X__


The registrant had 9,271,054 shares of Common Stock outstanding as of February
9, 2004.






                                        1

<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," "could," "would,"
"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 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,
     -- obtaining and maintaining anticipated operating efficiencies,
     -- pricing pressures,
     -- risks associated with foreign operations,
     -- the Company's ability to attract and retain key personnel,
     -- difficulties in maintaining 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,
     -- 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, 2003,
        and from time to time in the Company's other filings with the Securities
        and Exchange Commission.

Readers are urged to carefully review and consider the various disclosures made
by the Company in this Form 10-Q, the Company's Annual Report on Form 10-K for
the year ended June 30, 2003, and the Company's other filings with the SEC.
These reports attempt to advise interested parties of the risks and factors that
may affect the Company's business, financial condition and results of operations
and prospects. The forward-looking statements made in the Form 10-Q speak only
as of the date hereof and we disclaim any obligation to provide updates,
revisions or amendments to any forward-looking statements to reflect changes in
the Company's expectations or future events.




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 generally
accepted accounting principles in the United States 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, 2003.

In the opinion of the Company, all adjustments necessary to present fairly the
Company's consolidated financial position as of December 31, 2003, and the
results of its operations for the three and six month periods ended December 31,
2003 and 2002, and its cash flows for the six months periods then ended, have
been included.



                                       2
<PAGE>


Item 1:  FINANCIAL STATEMENTS

                    AFP Imaging Corporation and Subsidiaries
        Consolidated Balance Sheets - December 31, 2003 and June 30, 2003
        -----------------------------------------------------------------

<TABLE>
<CAPTION>


<S>                                <C>           <C>                <C>                                  <C>            <C>
Assets                            December 31,    June 30,          Liabilities and                      December 31,     June 30,
                                     2003          2003             Shareholders' Equity                     2003           2003
                                 -------------- ------------                                            -------------- -------------
                                  (Unaudited)                                                            (Unaudited)
CURRENT ASSETS:                                                     CURRENT LIABILITIES:
 Cash and cash equivalents         $660,558      $658,138           Current portion of long-term debt    $1,304,127     $2,141,931
 Accounts receivable, less                                          Accounts payable                        837,277        998,710
  allowance for doubtful                                            Accrued expenses                        861,777        952,729
  accounts of $87,000                                                                                   ------------   -------------
  and $95,200, respectively       1,915,847     2,249,481           Total current liabilities             3,003,181       4,093,370
 Inventories                      2,024,579     2,482,004                                               ------------   -------------
 Prepaid expenses and other
  current assets                     93,000        99,092            LONG TERM DEBT                         355,556         630,556
                                ------------  ------------                                              ------------   -------------

 Total current assets             4,693,984     5,488,715            SHAREHOLDERS' EQUITY
                                ------------  ------------            Common stock, $.01 par value,
                                                                       30,000,000 shares authorized,
PROPERTY, PLANT AND EQUIPMENT,                                         9,271,054 shares issued and
 At cost                          2,098,238     2,034,964              outstanding at
 Less accumulated depreciation   (1,668,199)   (1,582,697)             December 31, 2003, and
                                ------------  ------------             June 30, 2003                         92,710         92,710
                                    430,039       452,267
                                                                      Common stock warrants                  19,800         19,800
                                                                      Paid-in capital in excess of par   11,545,883     11,545,883
OTHER ASSETS                         68,147       102,873             Accumulated deficit                (9,824,960)    (10,338,464)
                                ------------  ------------                                              ------------   -------------
                                                                      Total shareholders' equity          1,833,433       1,319,929
                                                                                                        ------------   -------------
                                 $5,192,170    $6,043,855                                                $5,192,170     $6,043,855
                                ============  ============                                              ============   ============

</TABLE>

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)


<TABLE>
<CAPTION>

                                                                          Three Months Ended        Six Months Ended
                                                                             December 31,              December 31
                                                                           2003        2002        2003         2002
                                                                        ----------- ----------- ----------- ------------

<S>                                                                     <C>         <C>         <C>          <C>
NET SALES                                                               $4,680,557  $4,821,155  $8,715,436   $8,885,949

COST OF SALES                                                            2,833,023   3,136,009   5,309,360    5,849,558
                                                                        ----------- ----------- ----------- ------------

     Gross profit                                                        1,847,534   1,685,146   3,406,076    3,036,391

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES                             1,270,786   1,379,216   2,547,362    2,794,166
RESEARCH AND DEVELOPMENT EXPENSES                                           92,004     174,658     200,597      292,542
                                                                        ----------- ----------- ----------- ------------
                                                                         1,362,790   1,553,874   2,747,959    3,086,708
                                                                        ----------- ----------- ----------- ------------

     Operating income (loss)                                               484,744     131,272     658,117      (50,317)

INTEREST EXPENSE, net                                                       39,028      55,993      83,141      111,745
                                                                        ----------- ----------- ----------- ------------

     Income (loss) before income taxes                                     445,716      75,279     574,976     (162,062)

PROVISION FOR INCOME TAXES                                                  47,272       4,620      61,472        8,620
                                                                        ----------- ----------- ----------- ------------

INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF CHANGE
 IN ACCOUNTING PRINCIPLE                                                   398,444      70,659     513,504     (170,682)

CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE                            ---         ---         ---   (1,297,069)
                                                                        ----------- ----------- ----------- ------------

NET INCOME (LOSS)                                                         $398,444     $70,659    $513,504  ($1,467,751)
                                                                        =========== =========== =========== ============

INCOME (LOSS) PER SHARE BEFORE CUMULATIVE EFFECT OF CHANGE
 IN ACCOUNTING PRINCIPLE
         Basic                                                                $.04        $.01        $.06        ($.02)
                                                                        =========== =========== =========== ============
         Diluted                                                              $.04        $.01        $.05        ($.02)
                                                                        =========== =========== =========== ============

NET INCOME (LOSS) PER COMMON SHARE
         Basic                                                                $.04        $.01        $.06        ($.16)
                                                                        =========== =========== =========== ============
         Diluted                                                              $.04        $.01        $.05        ($.16)
                                                                        =========== =========== =========== ============

WEIGHTED AVERAGE OUTSTANDING COMMON STOCK
         Basic                                                           9,271,054   9,271,054   9,271,054    9,271,054
                                                                        =========== =========== =========== ============
         Diluted                                                         9,522,350   9,271,054   9,402,036    9,271,054
                                                                        =========== =========== =========== ============


</TABLE>


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


                                       4

<PAGE>



                    AFP Imaging Corporation and Subsidiaries
 Consolidated Statements of Shareholders' Equity and Comprehensive Income (Loss)
               For the Six Months Ended December 31, 2003 and 2002
               ---------------------------------------------------
                                   (Unaudited)


<TABLE>
<CAPTION>

<S>                                    <C>            <C>      <C>       <C>            <C>            <C>           <C>
                                                                                                       Foreign
                                      Comprehensive            Common      Paid-in                     Currency
                                         Income      Common    Stock     Capital In     Accumulated   Translation
                                         (Loss)      Stock    Warrants  Excess of Par    Deficit      Adjustment      Total
                                         ------      -----    --------  -------------    -------      ----------      -----

Balance June 30, 2002                    $   ---      $92,710  $19,800   $11,545,883    $(8,823,057)   $(12,619)     $2,822,717

     Foreign currency translation
      adjustment                           1,130          ---      ---           ---            ---       1,130           1,130

     Net loss for six months
      ended December 31, 2002         (1,467,751)         ---      ---           ---     (1,467,751)        ---      (1,467,751)
                                     -----------

Comprehensive Loss                   $(1,466,621)         ---      ---           ---            ---         ---            ---
                                     ============-------------------------------------------------------------------------------
Balance December 31, 2002                             $92,710  $19,800   $11,545,883   $(10,290,808)   $(11,489)    $1,356,096
                                                      =======  =======   ===========   ============    =========    ===========


Balance June 30, 2003                   $    ---     $92,710  $19,800   $11,545,883    $(10,338,464)   $    ---     $1,319,929

     Net income for six  months
      ended December 31, 2003            513,504         ---      ---           ---         513,504         ---        513,504
                                    =============

Comprehensive Income                    $513,504         ---      ---           ---             ---         ---            ---
                                    =============-------------------------------------------------------------------------------
Balance December 31, 2003                            $92,710  $19,800  $11,545,883     $(9,824,960)    $    ---     $1,833,433
                                                     =======  =======  ===========     ============    ========     ===========



</TABLE>


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


                                       5

<PAGE>



                    AFP Imaging Corporation and Subsidiaries
                     Consolidated Statements of Cash Flows
              For the Six Months Ended December 31, 2003 and 2002
              ---------------------------------------------------
                                  (Unaudited)


<TABLE>
<CAPTION>


<S>                                                                                               <C>       <C>
                                                                                                    2003         2002
                                                                                               ------------ ------------

CASH FLOWS FROM OPERATING ACTIVITIES:
  Net Income (loss)                                                                               $513,504  $(1,467,751)
                                                                                               ------------ ------------
  Adjustments to reconcile net income (loss) to net cash provided by operating activities-
    Depreciation and amortization                                                                  113,498      134,494
    Cumulative effect of change in accounting principle                                                ---    1,297,069
    Change in assets and liabilities:
       Decrease in accounts receivable                                                             333,634      415,873
       Decrease in inventories                                                                     457,425      607,147
       Decrease/(increase) in prepaid expenses and other assets                                     12,822      (62,469)
       Decrease in accounts payable                                                               (161,433)    (617,062)
       (Decrease)/increase in accrued expenses                                                     (90,952)     104,928
                                                                                               ------------ ------------

       Total adjustments                                                                           664,994    1,879,980
                                                                                               ------------ ------------

       Net cash provided by operating activities                                                 1,178,498      412,229
                                                                                               ------------ ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
       Capital expenditures                                                                        (63,274)     (83,900)
                                                                                               ------------ ------------

       Net cash used in investing activities                                                       (63,274)     (83,900)
                                                                                               ------------ ------------

CASH FLOW FROM FINANCING ACTIVITIES:
       Borrowing of debt                                                                               ---       89,072
       Repayment of debt                                                                        (1,112,804)    (141,666)
                                                                                               ------------ ------------

       Net cash used by financing activities                                                    (1,112,804)     (52,594)
                                                                                               ------------ ------------

EXCHANGE RATE EFFECTS ON CASH AND CASH EQUIVALENTS                                                     ---        1,130
                                                                                               ------------ ------------

       Net increase in cash and cash equivalents                                                     2,420      276,865

CASH AND CASH EQUIVALENTS, at beginning of period                                                  658,138      516,494
                                                                                               ------------ ------------

CASH AND CASH EQUIVALENTS, at end of period                                                       $660,558     $793,359
                                                                                               ============ ============

SUPPLEMENTAL CASH FLOW DISCLOSURES:
    Cash paid during the year for-
              Interest                                                                             $88,433     $111,538
              Income taxes net of refunds                                                          $11,472       $8,620


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


</TABLE>

                                       6


<PAGE>


AFP Imaging Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2003
-----------------
(Unaudited)


(1) General:
    -------
AFP Imaging Corporation (together with its subsidiaries, the "Company") was
organized on September 20, 1978, under the laws of the State of New York. The
Company is engaged in the business of designing, developing, manufacturing and
distributing equipment for generating, capturing or producing medical and dental
images through digital technology as well as the chemical processing of
photosensitive materials. Medical, dental, veterinary and industrial
professionals use these products. The Company's products are distributed to
worldwide markets through a network of independent and unaffiliated dealers.

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 consolidated financial statements included in the Company's Annual
Report on Form 10-K for the year ended June 30, 2003.

In September 2003, the Company completely dissolved two of its wholly-owned
subsidiaries: LogEtronics Corporation and Regam Medical Systems AB. The Company
sold selected assets of its graphic arts business in July 2001, which had been
distributed through LogEtronics Corporation. Upon completion of the transfer of
the manufacturing operations to the United States, the Company, in accordance
with Swedish Law, dissolved Regam Medical Systems AB.

The Company currently has two employee incentive stock option plans, under which
approximately 1,600,000 shares of Common Stock are authorized and available for
issuance. Under the terms of the plans, options to purchase common stock of the
Company may be granted at not less than 100% of the fair market value of the
stock on the date of grant, or 110% of the fair market value if granted to
persons owning more than 10% of the outstanding stock of the Company. The
Company accounts for these plans pursuant to Accounting Principles Board Opinion
No. 25 "Accounting for Stock Issued to Employees," under which no compensation
cost has been recognized. Had compensation cost for these plans been determined
based on the fair value at the grant dates consistent with SFAS No. 123,
"Accounting for Stock-Based Compensation" and SFAS No. 148, "Accounting for
Stock-Based Compensation-Transition and Disclosure-an Amendment of FASB
Statement No. 123", the Company's net income and earnings per share would have
been reduced by an insignificant amount.

(2) Adoption of New Accounting Standards:
    ------------------------------------
In July 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No.
141, "Business Combinations" ("SFAS 141") and SFAS No. 142, "Goodwill and Other
Intangible Assets" ("SFAS 142"). These standards changed the accounting for
business combinations by, among other things, prohibiting the prospective use of
pooling-of-interests accounting and required companies to stop amortizing
goodwill and certain intangible assets with an indefinite useful life. Instead,
goodwill and intangible assets deemed to have an indefinite useful life will be
subject to an annual review for impairment. The new standards generally were
effective for the Company as of July 1, 2002 and for purchase business
combinations consummated after June 30, 2001. SFAS 142 requires that goodwill
and intangible assets deemed to have an indefinite useful life be reviewed for
impairment upon adoption of SFAS 142 (July 1, 2002) and at least annually
thereafter.

Under SFAS 142, goodwill impairment is deemed to exist if the net book value of
a reporting unit exceeds its estimated fair value. The Company has one reporting
unit, which comprises its entire operating segment. This methodology differs
from the Company's previous policy, as permitted under accounting standards
existing at that time, of using undiscounted cash flows to determine if goodwill
is recoverable.

Upon adoption of SFAS 142 in the first quarter of Fiscal 2003, the Company
recorded a one-time, non-cash charge of approximately $1,297,069 ($.14 basic and
diluted loss per share), to reduce the carrying value of its goodwill. Such
charge was non-operational in nature and is reflected as a cumulative effect of
a change in accounting principle in the accompanying consolidated statement of
operations. In calculating the impairment charge, the fair value of its
reporting unit was estimated by comparison to the Company's quoted market
capitalization at July 1, 2002 since the reporting unit represents all of the
Company's operations.


                                       7
<PAGE>


In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity" ("SFAS No.
150"). SFAS No. 150 establishes standards for how an issuer classifies and
measures certain financial instruments with characteristics of both liabilities
and equity. SFAS No. 150 was effective July 1, 2003 for the Company. The Company
has determined that the provisions of SFAS No. 150 did not have a material
effect on the Company's results of operations or financial position.

In December 2003, the FASB issued a revised SFAS No. 132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits-an amendment of
SFAS Nos. 87, 88 and 106". This revision to SFAS No. 132 requires additional
disclosures about the assets, obligations, cash flows, and net periodic benefit
cost of defined benefit pension plans and other defined benefit postretirement
plans. The Company has determined that the provisions of SFAS No. 132 did not
have a material effect on the Company's results of operations or financial
position.

(3) Basic and Diluted Income (Loss) Per Common Share:
    ------------------------------------------------

The computation of net income (loss) per common share is based upon the weighted
average number of common shares outstanding during the period, plus, in periods
in which they have a dilutive effect, the effect of shares contingently
issuable. The diluted weighted average number of shares outstanding includes
115,764 shares of common stock issuable upon exercise of outstanding stock
options in the first six months of Fiscal 2004; but does not include any shares
of common stock issuable upon exercise of outstanding options in the first six
months of Fiscal 2003, as all of the outstanding stock options were at exercise
prices equal to or above the average stock price for the six month period. The
diluted weighted average number of shares outstanding includes 15,218 shares of
common stock issuable upon the exercise of outstanding warrants in the first six
months of Fiscal 2004; but does not include any shares of common stock issuable
upon exercise of outstanding warrants in the first six months of Fiscal 2003, as
all of the outstanding warrants were at exercise prices equal to or above the
average stock price for the six month period.

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

On September 21, 2001, the Company established a new three-year senior secured
credit facility (the "Revolving Credit Loan"), consisting of a $3.5 million
revolving line of credit, which replaced its then existing senior secured credit
facility. The Revolving Credit Loan is secured by all of the Company's
inventory, accounts receivable, equipment, officer 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. As of December 31, 2003, the amount outstanding under the
Revolving Credit Loan was $754,100 and, the Company was in compliance with all
the terms and conditions of the Revolving Credit Loan, as amended. The Revolving
Credit Loan has an interest rate of 1 3/4% over the prime rate, currently at 5
3/4%, a specific formula to calculate available funds based on eligible accounts
receivable and inventory, and certain reporting requirements to the senior
secured lender. In connection with the Revolving Credit Loan, the Company issued
a 5-year warrant to the lender for the purchase of 100,000 shares of the
Company's common stock at an exercise price of $.32 per share, subject to an
adjustment for all issuances of stock. The Black-Scholes method was used to
value these warrants, and the stock price was based on the stock price the day
prior to closing, plus 10%, as stipulated in the Loan and Security Agreement for
the Revolving Credit Loan.

The Revolving Credit Loan is classified as a current liability in accordance
with EITF 95-22 (Balance Sheet Classification of Borrowings Outstanding under
Revolving Credit Agreements That Include Both a Subjective Acceleration Clause
and a Lock-Box Arrangement) since the Loan and Security Agreement contains a
subjective acceleration clause and contractual provisions that require the cash
receipts of the Company be used to repay amounts outstanding under the revolving
credit facility.

Included in debt are two subordinated promissory notes related to prior
acquisitions. These notes total $905,556 at December 31, 2003, of which
approximately $550,000 has been classified as a current liability.

The Company is dependent upon the Revolving Credit Loan to finance its overall
operations. It is believed that the Revolving Credit Loan is sufficient to
finance the Company's ongoing working capital requirements for the foreseeable
future. At February 6, 2004, the Company had available $1,330,000 of unused
credit under the Revolving Credit Loan.

(5) Inventory:
    ---------

Inventories, which include material, labor and manufacturing overhead, are
stated at the lower of cost (first-in, first-out) or market (net realizable
value). The Company uses a standard cost accounting system in conjunction with
an actual perpetual inventory system to properly account for, control, and
maintain the movement of all inventory components. All standard costs are
reviewed periodically and updated accordingly, to verify that the standard costs
approximate the actual costs. At December 31, 2003 and June 30, 2003,
inventories consist of the following:

                                       8


<PAGE>



                                            December 31, 2003     June 30, 2003
                                            -----------------    ---------------
    Raw materials and sub-component parts      $1,286,332          $1,455,164
    Work-in-process and finished goods            738,247           1,026,840
                                            -----------------    ---------------
                                               $2,024,579          $2,482,004
                                            =================    ===============

(6) Income Taxes:
    ------------

Income taxes are accounted for under the asset and liability method. No income
tax benefits related to the losses reported in prior years have been recorded,
in recognition of the uncertainty regarding the ultimate amount of income tax
benefits to be derived from the net operating losses. As a result, income earned
in the current year is not subject to a tax provision for Federal or certain
state purposes, as the Company will utilize a portion of these prior year net
operating loss carryforwards. The Company's income tax provisions for the Fiscal
2004 and Fiscal 2003 six-month periods relate to state or foreign income and
capital taxes, net of any refunds received.

(7) Segment Information:
    -------------------

As of December 31, 2003, the Company had only one business segment,
medical/dental, as the Company sold its graphic arts business to a third party
in July 2001. All costs, associated with the disposition of the graphic arts
business, were recorded in fiscal 2001. The medical/dental segment operations
are conducted under the AFP and Dent-X trade names and consist of the design,
development, manufacturing, marketing and sale of medical and dental film
processors, imaging systems and all related accessories.



                                       9

<PAGE>


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

Capital Resources and Liquidity
-------------------------------

The Company's working capital at December 31, 2003 increased by approximately
$295,500 from June 30, 2003. This increase is due to internally generated funds
as well as reductions in accounts receivable and inventory offset by reductions
in accounts payable, accrued expenses, revolver debt and subordinated debt.

On September 21, 2001, the Company established a new three-year senior secured
credit facility (the "Revolving Credit Loan"), consisting of a $3.5 million
revolving line of credit, which replaced its then existing senior secured credit
facility. The Revolving Credit Loan is secured by all of the Company's
inventory, accounts receivable, equipment, officer 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. As of December 31, 2003, the Company was in compliance
with all the terms and conditions of the Revolving Credit Loan, as amended. The
Revolving Credit Loan has an interest rate of 1-3/4% over the prime rate,
currently at 5 3/4 %, a specific formula to calculate available funds based on
eligible accounts receivable and inventory, and certain reporting requirements
to the senior secured lender. 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 an exercise price of $.32 per share,
subject to an adjustment for all issuances of stock. The Black-Scholes method
was used to value these warrants. The exercise price of these warrants was based
on the stock price on the day prior to the closing of the Revolving Credit Loan,
plus 10%, as provided in the Loan and Security Agreement for the Revolving
Credit Loan.

Included in debt are two subordinated promissory notes related to prior dental
company acquisitions. These notes total $905,556 in principal amount at December
31, 2003, of which approximately $550,000 has been classified as a current
liability. The Company is current on all principal and interest payments due the
note holders.

The Company's historical operating cash flows have been positive; however, the
Company is dependent upon the Revolving Credit Loan to finance its ongoing
operations. It is believed that the Revolving Credit Loan is sufficient to
finance the Company's ongoing working capital requirements for the foreseeable
future. The Company expects its working capital requirements will continue to be
financed by operations and from borrowings, including the Revolving Credit Loan.
The Company currently believes that there are no significant trends, demands,
commitments or contingencies, other than a general decline in sales and/or the
ongoing litigation cases, which are reasonably likely to result in a material
increase or decrease in its liquidity or capital resources in the foreseeable
future. At February 6, 2004, the Company had available $1,330,000 of unused
credit under the Revolving Credit Loan.

The Company's Revolving Credit Loan expires on September 21, 2004, at which time
the Company expects to refinance it with the existing lender or a comparable
lender with equivalent terms and conditions.

Capital expenditures for the first six months of Fiscal 2004 were $63,274
consisting of tooling, foundry and test equipment expenditures related to the
design, development and production of the new imaging products; and the purchase
of a new modular trade show booth for national dental exhibitions. Where
practical, the Company continues to conserve its cash. The Company expects to
continue to finance any future capital requirements principally from internally
generated funds. Capital expenditures are limited under the terms of the
Revolving Credit Loan.

Results of Operations - Six Months Fiscal 2004 Versus Six Months Fiscal 2003
----------------------------------------------------------------------------

In June 2003, management developed a significant cost reduction program, which
was implemented effective July 2003. These reductions included elimination of
non-productive product lines, a 7% decrease in the work force, and numerous cost
cutbacks throughout the Company. The Company expects to significantly reduce
both direct and non-direct overhead costs as a result of this program.

The Company began shipments of its new digital dental sensor, "EVA" (R) during
November 2002, mainly to international dealers and distributors. The Company
received FDA clearance for the EVA sensor in March 2003, which permits the
Company to market and distribute the product domestically. This digital sensor
is also used in various veterinary dental applications. The Company intends to
increase production of this new product as sales develop. The Company is
continuing to develop its sensors, accessories and related software, and
anticipates both domestic and international growth in this product line.

                                       10

<PAGE>


Sales decreased approximately $170,500 or 2% between the Fiscal 2004 and Fiscal
2003 six-month periods. The Company's medical product sales stayed relatively
constant between the periods; however there was a 60% increase in the veterinary
products offset by a decrease in the medical ultrasound and film recording
cameras due to this product line's discontinuance. Medical analog products
stayed constant between the two six month periods. The Company's dental product
sales decreased approximately $175,000 net, due to the impact of the new digital
sales versus the analog products. International sales declined approximately
$278,000 in the current six-month period, mainly in medical equipment sales. The
Company believes this decline can be attributed to uncertainty in the global
markets and fluctuating currency exchange rates.

Gross profit as a percent of sales increased 4.9 percentage points between the
Fiscal 2004 and Fiscal 2003 six-month periods. Both the medical and dental
product lines showed slight improvement in their margins, due to increased
operating efficiencies. The product mix between manufactured and distributor
goods were relatively constant between the two six-month periods. Labor and
overhead costs, which are included in cost of sales, were approximately $270,600
or 3 percentage points lower in the current six-month period, due to the
above-mentioned cost reductions.

Selling, general, and administrative costs decreased approximately $246,800 or
8.8%, between the Fiscal 2004 and Fiscal 2003 six-month periods. Most of this
decrease is attributable to the cost reduction plan implemented as of July 2003.
Management reviewed all significant cost centers and eliminated or reduced many
major expenses, including payroll and related benefit costs, communication,
travel and entertainment, trade show costs and technology purchases. Management
will continue to monitor and control the level of discretionary spending.

Research and development costs decreased, approximately $91,900 or 31%, between
the Fiscal 2004 and Fiscal 2003 six-month periods. This decrease is mainly
attributable to the timing of expenditures relating to the Company's continued
investment in the design, development and refinement of its new imaging
products. The Company continues to invest in sustaining engineering and related
costs for its existing products. All research and development costs are expected
to fluctuate between reporting periods.

Interest expense, net, decreased, approximately $28,600 or 26%, between the
Fiscal 2004 and Fiscal 2003 six-month periods, primarily due to several factors.
There was approximately $527,000 less in average monthly revolving credit
borrowings for the current six-month period ended December 31, 2003; the prime
rate of borrowing, upon which all senior debt is based, was slightly lower in
the current six-month period; and the LIBOR rate of borrowing, upon which a
subordinated note is based was significantly lower in the current six-month
period.

The income tax provisions for the six-month periods in Fiscal 2004 and Fiscal
2003 primarily reflect certain state income and capital taxes. No tax benefit
has been recognized for the losses incurred in prior years and therefore no tax
provision has been recorded in the current year as these losses are utilized for
income tax purposes.

In Fiscal 2003, in compliance with the FASB SFAS No. 142, "Goodwill and Other
Intangible Assets", the Company reviewed its remaining goodwill, which related
to the Swedish dental acquisition in April 1997, and determined that, under the
revised accounting valuation rules, such goodwill had significantly diminished
in value. Therefore, in compliance with SFAS No. 142, the Company took a
one-time charge of $1,297,069 to completely write-off the goodwill associated
with this acquisition. As the Company no longer has any goodwill, management
does not expect that future compliance with SFAS No. 142 will have a material
effect on the Company's financial position or results of operation, except for
any potential future acquisitions involving goodwill or other intangible assets.

Results of Operations - Second Quarter Fiscal 2004 Versus Second Quarter
Fiscal 2003
--------------------------------------------------------------------------------

Sales decreased approximately $140,600 or 3% between the second quarter Fiscal
2004 and the second quarter Fiscal 2003. Medical product sales increased
$100,000 mainly in the veterinary products. The medical analog products stayed
relatively constant in these two quarters. Dental products decreased
approximately $140,000 between the second quarter Fiscal 2004 and the second
quarter Fiscal 2003, due to the impact of the new digital sales versus the
analog products. International sales declined approximately $130,000 in the
current quarter, mainly in medical equipment sales.

Gross profit as a percent of sales increased 4.5 percentage points between the
second quarter Fiscal 2004 and the second quarter Fiscal 2003. Both the medical
and dental product lines showed slight improvement in their margins, due to
increased operating efficiencies. The product mix between manufactured and
distributor goods were relatively constant between the two three-month periods.
Labor and overhead costs, which are included in cost of sales, were
approximately $136,100 or 2.4 percentage points lower in the current quarter,
due to the above-mentioned cost reductions.


                                       11

<PAGE>


Selling, general and administrative costs decreased by $108,400 or 8% between
the second quarter Fiscal 2004 and the second quarter Fiscal 2003. Most of this
decrease is attributable to the cost reduction plan implemented as of July 2003.
Management reviewed all significant cost centers and eliminated or reduced many
major expenses, including payroll and related benefit costs, communication,
travel and entertainment, trade show costs, and technology purchases.

Research and developments costs decreased $82,600 or 47% between the second
quarter Fiscal 2004 and the second quarter Fiscal 2003. This decrease is mainly
attributable to the timing of expenditures relating to the Company's continued
investment in the design, development and refinement of its new imaging
products. The Company continues to invest in sustaining engineering and related
costs for its existing products.

Interest expense, net, decreased approximately $17,000 or 30% between the second
quarter Fiscal 2004 and the second quarter Fiscal 2003. There was approximately
$660,000 less in average monthly revolving credit borrowings for the current
three-month period ended December 31, 2003; the prime rate of borrowing, upon
which all senior debt is based, was slightly lower in the current quarter; and
the LIBOR rate of borrowing, upon which a subordinated note is based was
significantly lower in the current three-month period.

The income tax provisions for the three-month periods in Fiscal 2004 and Fiscal
2003 primarily reflect certain state income and capital taxes. No tax benefit
has been recognized for the losses incurred in prior years, and therefore no tax
provision has been recorded in the current year as these losses are utilized for
income tax purposes.

Item 3:   Quantitative and Qualitative Disclosures About Market Risk.
---------------------------------------------------------------------

Not Applicable.

Item 4:  Controls and Procedures.
---------------------------------

a) Evaluation of disclosure controls and procedures.
   ------------------------------------------------

Our co-chief executive officers and chief financial officer have reviewed and
evaluated the effectiveness of the Company's disclosure controls and procedures
(as defined in Rules 13a - 15 (e) and 15d -15 (e) of the Securities Exchange Act
of 1934 (the "Act")). Based on their review and evaluation, the co-chief
executive officers and chief financial officer have concluded as of December 31,
2003, that the Company's disclosure controls and procedures were adequate and
effective to ensure that information required to be disclosed by the Company in
the reports that it files or submits under the Act is recorded, processed,
summarized and reported, within the time periods specified in the rules and
forms of the Securities and Exchange Commission.

(b) Changes in internal controls.
    ----------------------------

During the six months and quarter ended December 31, 2003, there were no
significant changes in the Company's internal controls or in other factors that
could significantly affect these internal controls, nor were there any
significant deficiencies or material weaknesses in these internal controls
requiring corrective actions. As a result, no corrective actions were taken.


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, 2003, and to the references therein, for a discussion
of all material pending legal proceedings to which the Company and its
subsidiaries are parties. As of December 31, 2003, there have been no
significant changes to the status of the product liability insurance action nor
the two environmental matters relating to property in New Jersey owned by the
Company between August 1984 and June 1985.

Item 2:   Changes in Securities and Use of Proceeds.
---------------------------------------------------

None

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

None

                                       12

<PAGE>



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

On December 8, 2003, the Company held an Annual Meeting of Shareholders to elect
four directors for a term of one year or until their successors are duly
elected.

The nominees were each elected to the Board of Director's by the following
votes:

                                For Election             Against Election
     David Vozick                8,529,608                    105,683
     Donald Rabinovitch          8,529,608                    105,683
     Jack Becker                 8,529,608                    105,683
     Robert Blatt                8,529,608                    105,683


Item 5:    Other Information.
----------------------------

The Company has adopted a written Code of Ethics that applies to its principal
executive officers, principal financial officer, principal accounting officer or
other persons performing similar functions in accordance with Section 406 of the
Sarbanes-Oxley Act of 2002. This Code of Ethics is included as Exhibit 14.

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

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

           14. - AFP Imaging Corporation - Code of Ethics for senior, executive
           officers, pursuant to Section 406 of the Sarbanes - Oxley Act of
           2002.

           31.1, 31.2, 31.3 - Certifications pursuant to Exchange Act Rule
           13a - 15 (e).

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

     (b)   Reports on Form 8-K:
           -------------------

           None


                                       13

<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:  February 13, 2004


                                    /s/__Donald Rabinovitch__________
                                    Donald Rabinovitch
                                    President
                                    (Principal Executive Officer)
                                    Date:  February 13, 2004


                                    /s/__Elise Nissen________________
                                    Elise Nissen
                                    Chief Financial Officer
                                    (Principal Financial and Accounting Officer)
                                    Date:  February 13, 2004







                                       14