Edgar Filing: IMAGE TECHNOLOGY LABORATORIES INC

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-KSB

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

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004

IMAGE TECHNOLOGY LABORATORIES, INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 22-3531373
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)

602 ENTERPRISE DRIVE, KINGSTON, NEW YORK 12401
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (845) 338-3366

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

COMMON STOCK
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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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in the definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]

The issuer's revenues for the most recent fiscal year were $894,245.

The aggregate market value of the voting stock held by non-affiliates of the
Registrant, based on the $.29 last sales price reported by OTC.BB on April
15,2005 was $3,041,742.

As of April 15, 2005, the Registrant had issued and outstanding 14,638,778
shares of common stock.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive Proxy Statement for the 2005 Annual Meeting of
Shareholders filed electronically with the Securities and Exchange Commission on
or about April 28, 2005 are incorporated in Part III of this Form 10-KSB by
reference.

Transitional Small Business Disclosure Format (Check one): Yes __ No X
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FORWARD-LOOKING STATEMENTS

This report and the documents incorporated in it by reference contain
forward-looking statements about our plans, objectives, expectations and
intentions. You can identify these statements by words such as "expect,"
"anticipate, " "intend, " "plan", "believe," "seek", "estimate," "may," "will"
and "continue" or similar words. You should read statements that contain these
words carefully. They discuss our future expectations, contain projections of
our future results of operations or our financial condition or state other
forward-looking information, and may involve known and unknown risks over which
we have no control. You should not place undue reliance on forward-looking
statements. We cannot guarantee any future results, levels of activity,
performance or achievements. Moreover, we assume no obligation to update forward
looking statements or update the reasons actual results could differ materially
from those anticipated in forward-looking statements, except as required by law.
Factors, that could cause actual results to differ materially from those
expressed or implied by such forward looking statements include that factors
discussed in the report in Part 1, Item 1, including the section captioned "Risk
Factors that May Affect Future Results" and "Management's Discussion and
Analysis of Financial Condition or Plan of Operation."

PART I

ITEM 1. DESCRIPTION OF BUSINESS

Image Technology Laboratories, Inc. ("ITL", "the Company", "Registrant" or "we")
is a medical image and information management company in the healthcare IT
market. We were incorporated in Delaware on December 5, 1997. ITL has developed
a single database "Radiology Information System/Picture Archiving and
Communication System", known as RIS/PACS for use in the management of patient
information and medical images by hospitals and diagnostic imaging centers. The
PACS portion of the system acquires and stores diagnostic images in digital
format from original imaging sources, such as:

o Computerized Tomography (CAT scan)
o Magnetic Resonance Imaging (MRI)
o Ultrasound
o Nuclear Imaging
o Digital Fluoroscopy
o Computed Radiography
o Digital Mammography
o Digital Radiography
o Positron Emission Tomography (PET)

The RIS portion of the system inputs and stores patient demographics, insurance
information, billing and scheduling information required to complete the patient
visit. The RIS system also manages the reports generated by the radiologist from
the patient's image data. All of the data is retained in standard DICOM (Digital
Imaging and Communications in Medicine) and HL-7 (Health Level-7) formats.

The Company is a systems integrator that provides a total solution of hardware
and software to the customer. There are two (2) pricing models. The first is an
outright capital purchase and the second is a fee per usage basis. The latter
plan is an attractive approach for the Company's clients, as there is no capital
outlay and the cost is expensed.

Dr. David Ryon, a radiologist and a founder of ITL, had a vision for an all
digital radiology business management system that would empower clinicians to
deliver better quality of care to their patients. Dr. Ryon's vision was shared
by co-founders Lewis M. Edwards, an expert in networking and image management,
and fellow radiologist Dr. Carlton T. Phelps. The engineering team was charged
with the design and implementation of a medical information system that would
take advantage of digital technology to completely automate the workflow
functions of an imaging department or center.

ITL installed a beta-version of the system at the Kingston Diagnostic Center
during May 2001. The entire process of patient scheduling, registration, image
acquisition, image display, and radiographic report generation was totally
automated in a way yet to be demonstrated in the industry. At the heart of the
system is a software module referred to as the workflow manager. This software
determines what resources are available on the enterprise and distributes the
various pieces of work as applicable. For example, if multiple radiologists are
logged on to the system, unread studies are distributed based upon their
preference and skills. Once the study has been read, the dictation is
distributed to an available stenographer. After transcription, the report
returns to the reporting radiologist, wherever he is logged on, for proof
reading and final signature.

PRODUCTS

ITL's lead product is the WarpSpeed system. Through its unique, modular
architecture ITL has created a total radiology business solution that is readily
scaled and easily upgraded. These features will allow the Company to provide
products tailored to the size of its customers and to keep its customers at the
forefront of future technological advances by enabling the Company to easily
update existing systems.

The main special features of the WarpSpeed product include:

o Automation of the total workflow

o Integration of patient data with digital images

o A unique, radiologist-designed user interface

o The ability to place key, annotated images in the radiologist's report

o Quality review programs which analyze productivity and diagnostic
accuracy of individual radiologists or entire Radiology centers

o Windows 2000 as the network operating system

ITL has also designed a proprietary display workstation that permits the
simultaneous viewing of multiple diagnostic images together with relevant
patient data. The display of information emulates the current film based
paradigm that uses traditional X-Ray view boxes for the display of multiple
images. The heart of the radiologist view station is a proprietary multi-monitor
touch-screen controlled workstation. Research has shown that simultaneous image
display improves the speed and accuracy of diagnostic interpretation. The
display workstation consists of proprietary software developed by ITL and
commercially available hardware. The unique feature of the display station is
its ability to present an unlimited number of diagnostic images on multiple
display surfaces. The software blends together an unlimited number of monitors,
of arbitrary resolution, into one large virtual display.

The WarpSpeed system can be used to create, store, reproduce and transmit
digitized images generated by current diagnostic imaging modalities, including
digital radiography, ultrasound, nuclear medicine, digital fluoroscopy, computed
tomography, and magnetic resonance imaging. Using WarpSpeed, radiologists can
read and interpret digital images from any imaging modality that is connected to
the network. This includes remote locations connected via encrypted tunnels
(VPNs) over the Internet. This facilitates time-critical transfer of patient
information between hospital departments, as well as rapid off-site

consultations by specialists at remote locations. The system also affords
convenient home viewing by radiologists.

Hospitals and other health organizations can utilize the WarpSpeed system to
permanently replace film. The solution has been designed to interface with
hospital information systems so that a patient's clinical data can be integrated
with diagnostic images for increased accuracy of image interpretation and
diagnosis.

The architecture used in the WarpSpeed system is built upon the foundation of
innovative intelligent algorithms. These algorithms reduce the network bandwidth
and on-line storage requirements of the system; the two most important factors
in the cost associated with building a PACS/RIS system.

By making full use of the networking and database management infrastructure of
Windows 2000, ITL has leveraged recent advances in operating system design,
software development, and networking tools to produce a product which offers
greater functional capability at lower costs through scalable system
architecture. Its truly modular architecture permits capability to be
distributed incrementally, allowing a client to begin with one piece of
hardware, which operates as a server, viewer and archive, and then expand the
system by distributing those capabilities among multiple PCs. Hardware and
software can be sized exactly to client needs, thus enabling ITL to offer the
lowest possible entry point purchase price for a PACS/RIS system.

In addition, WarpSpeed offers capabilities not found on even the most expensive
systems, including:

o Unique graphical interface

o Transfer of control of the viewing surface to a separate touch-screen
control display

o Infinite screen "real estate"

o Intuitive, interactive interface that minimizes the need for training

o Support for a locally hosted Application Service Provider (ASP) model

o Full support for DICOM, HL7 and the IHE initiative.

MARKETING PLAN

ITL is marketing its WarpSpeed system in hospitals with less than 400 beds and
freestanding radiology imaging centers. According to the American Medical
Information, Inc. there are 2,795 major diagnostic imaging centers and more than
5,000 smaller imaging centers in the U.S. According to the American Hospital
Association, there are 5,800 hospitals in the U.S. Approximately one-half have
less than 400 beds.
According to the latest market research by Frost & Sullivan, a leading industry
research firm, the worldwide market for PACS was $1.8 billion in 2003 and will
grow to $4.5 billion by 2010. PACS technology, while widely appreciated, has yet
to be widely adopted. We believe this is a reflection of the limitation of
current solutions to deliver expected value. According to Frost & Sullivan,
approximately 17.7% of hospitals in North America had PACS in 2003.

ITL markets a fourth generation medical information and image management system
that we believe is more open, usable and scalable than any currently available
product. The Company is planning to market ITL's WarpSpeed system through an
in-house sales force supported by product advertising and promotion at industry
trade shows. ITL offers the product at a price point, which is well within the
reach of even the smallest hospital or imaging facility. The Company believes
that it can offer systems with superior price/performance characteristics.

COMPETITION AND COMPETITIVE ADVANTAGE

ITL is unique among the 50+ companies in the U.S. that are marketing or
developing RIS/PACS solutions for the radiology community. The Company believes
that it is the only company that has implemented a single unified product that
encompasses all aspects of the radiology business. To date no one company has
captured a predominant market share. Some of the larger RIS/PACS vendors are GE
Medical Systems, Agfa, Siemens Medical Solutions and Kodak Health Imaging - all
of which have expended effort to integrate RIS and PACS. There are a number of
vendors which now offer `single vendor' (disparate database) RIS/PACS, and many
vendors which offer simply the RIS or PACS components separately.

The superiority of ITL's system has been demonstrated in many areas. Its user
interfaces are intuitive thereby minimizing training time and operator error.
The unique touch screen interface increases speed of operation and productivity
of the radiologist. Radiology report turn around is typically less than two
hours, which is far superior to any other system currently in production. The
underlying architecture and design characteristics have been shown to be highly
scalable. These features alone set ITL apart from all competition.

The Company believes that most available RIS/PACS systems have significant
drawbacks such as:

o Poor user interfaces

o Inadequate workflow tools

o Lack of scalability

o Prohibitive entry point purchase prices.

o Significant management oversight to maintain disparate databases

ITL believes that such drawbacks account in part for the fact that none of its
competitors have been able to capture more than 20% of the market in recent
years. ITL intends to capitalize on these inherent weaknesses in the
competition.

PRODUCT APPROVAL PROCESS

ITL is a registered medical device manufacturer by the Food and Drug
Administration ("FDA"). The WarpSpeed solution is exempt from the pre-market
authorization process by the FDA. Our products have been declared substantially
equivalent to already approved products.

Although ITL is aware that there is an international market for products such as
WarpSpeed, we have no present plans to market our products in other countries,
largely due to limited resources. However, should we decide to market WarpSpeed
in other countries, we would have to comply with the laws of, and meet the
applicable regulatory procedures and standards in each jurisdiction in which we
sought to market our products. Approval in one jurisdiction does not assure
approval in another as the various federal, state, and local regulatory
authorities are independent of each other.

INSURANCE

ITL has obtained both corporate, product, and computer omissions and errors
liability insurance. We are at risk to product liability claims if the use of
our products is alleged to have caused harm to a patient. There is no direct
contact between the ITL product and the patient.

Under the terms of our executive employment agreements we are obligated to
maintain term life insurance for the benefit of Mr. Barry C. Muradian, ITL's
Chief Executive Officer and Mr. Lewis M. Edwards, ITL's Chief Technical Officer,
each in the amount of $300,000 if this can be obtained on commercially
reasonable terms. The Company at this time has not purchased life insurance.

MATERIAL CONTRACTS

In May 2003, ITL signed a five-year contract with Park Avenue Associates in
Radiology PC., Binghamton NY, for the installation of it's solution in a
multi-site environment. This installation required the deployment of hardware
and software in four physically separate locations interconnected with microwave
links, fiber-optic cable, and a traditional LAN. The interconnections also
include the use of secure, encrypted tunnels via the internet (VPN's). Remote
review stations have been deployed in private physician's offices.

In January 2004, ITL closed a five-year contract for the WarpSpeed system with
St. Anthony Community Hospital, Warwick, NY. St. Anthony is a member of Bon
Secours Charity Health System, which owns and operates 32 health care
facilities.

In February 2004, the Company borrowed $125,000 from Valley Commercial Capital,
LLC ("Valley"). This loan is evidenced by a promissory note, which provides for
interest at 8% per annum and calls for monthly payments of principal and
interest of $3,917 through February 2, 2007. In March 2004, the Company borrowed
an additional $138,997 from Valley, also evidenced by a promissory note, which
provides for interest at 8% per annum and calls for monthly payments of
principal and interest of $4,356 through March 29, 2007. As of December 31,
2004, the outstanding balances on these loans aggregated $200,763. These loans
are secured by the personal guarantee of the Estate of Dr. Ryon.

In December 2004, pursuant to a promissory note, Dr. Ryon loaned the Company
$105,000 with interest at 10% per annum. In April 2005, the Company renegotiated
the terms of the note with the Estate of Dr. Ryon to provide for a 24-month
payment schedule, beginning in January 2006.

In March 2005, the Company signed a contract for the sale of two of its
WarpSpeed RIS/PACS systems to InMed Diagnostic Services of Massachusetts, LLC at
multi-modality imaging centers specializing in women's health care, and one
WarpSpeed system to InMed Diagnostics Services of South Carolina, LLC in
Columbia. The Columbia, South Carolina site is the largest imaging center of the
InMed affiliates.

ITEM 2. DESCRIPTION OF PROPERTY

Image Technology's principal executive office currently occupies leased space at
602 Enterprise Drive, Kingston, NY. Image Technology's telephone number is (845)
338-3366 and its facsimile number is (845) 336-4931.

In November 2002, we executed a five-year lease (at $700 per month) for office
space at "TechCity", formerly the IBM facility in Kingston, NY. Tech City has
become the home of many high technology firms in the Hudson Valley. The space is
sufficient for our growing marketing/sales department, the R&D team and the
systems integration/test area.

Image Technology believes that its current facilities will meet its needs for
the foreseeable future.

ITEM 3. LEGAL PROCEEDINGS

as to the defamation claim, the Company was directed to amend prior filings to
reflect that he was not terminated for cause. The Company's claim for return of
Dr. Phelps's stock was denied. On September 15th 2004, the Arbitrator awarded
attorneys' fees and arbitration expenses totaling $120,810 and $9,250,
respectively to Dr. Phelps. The Arbitrator's award has not yet been confirmed. A
total of $130,060 has been added to the expenses in the Company's 2004 Statement
of Operations and the liabilities have been increased by the same amount in the
Company's Balance Sheet as of December 31, 2004.

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

There were no matters submitted to a vote of security holders during the fourth
quarter of the fiscal year ended December 31, 2004.

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Image Technology's Common Stock currently trades on the Over-the-Counter
Bulletin Board ("OTCBB") under the symbol "IMTL.OB". These securities commenced
trading on December 15, 2000. The following table lists the closing high and low
prices of the Company stock during 2003-2005:

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2003 2004 2005
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HIGH LOW HIGH LOW HIGH LOW
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1st Qtr. $ 0.28 $ 0.15 $ 1.00 $ 0.40 $ 0.45 $ 0.20

2nd Qtr 0.33 0.18 0.97 0.40

3rd Qtr. 0.31 0.17 0.70 0.39

4th Qtr. 0.50 0.26 0.45 0.25

As of March 31, 2005, the number of holders of record of Common Stock was 190.

DIVIDEND POLICY

The Company does not anticipate paying any cash dividends on its common stock in
the foreseeable future because it intends to retain its earnings to finance the
expansion of its business. Thereafter, the Board of Directors in light of
conditions then existing, including, without limitation, the Company's financial
condition, capital requirements and business condition will determine the
declaration of dividends.

ISSUANCE AND SALES OF SECURITIES

During 2004, the Registrant issued and sold the securities listed below pursuant
to exemptions from registration under the Securities Act.

In the first quarter of 2004, we sold 100,000 shares of our common stock, in a
private transaction, to a member of our Board of Directors. The sales price was
$.50 per share, the approximate fair value at the time, resulting in gross
proceeds to the Company of $50,000.

In April 2004, as compensation to a financial consultant, we issued a total of
12,500 shares having a fair market value of approximately $10,625 at the time of
issuance.

The issuances described above were made in reliance upon the exemptions from
registration set forth in Section 4(2) of the Securities Act relating to sales
by an issuer not involving any public offering. None of the foregoing

transactions involved a distribution or public offering. No underwriters were
engaged in connection with the foregoing issuances of securities, and no
underwriting commissions or discounts were paid.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

OVERVIEW

The following is a discussion of certain factors affecting the results of
operations, liquidity and capital resources of Image Technology Laboratories,
Inc. ("ITL"). You should read the following discussion and analysis in
conjunction with ITL's audited financial statements and related notes, which are
included elsewhere in this Annual Report on Form 10-KSB.

BUSINESS AND SUMMARY OF CRITICAL ACCOUNTING POLICIES:

ITL is a medical image management company in the healthcare information systems
market. We were incorporated in Delaware on December 5, 1997. ITL has developed
a single database "Radiology Information System and Picture Archiving and
Communications System" known as RIS/PACS for use in the secure management of
patient information and diagnostic images.

We expect that we will derive our future revenues primarily from sales of our
WarpSpeed system and associated maintenance charges along with Application
Service Provider (ASP) usage fees. We obtained our first contract for the sale
of WarpSpeed and related hardware and maintenance services in August 2002.
Accordingly, we are no longer in the development stage for accounting purposes,
but we continue to refine and enhance the capabilities of our WarpSpeed system.

We have had recurring losses and negative cash flows from our operating
activities since inception. We have cash of approximately $4,000 and a working
capital deficiency of approximately $304,000 as of December 31, 2004. A
substantial portion of our historical losses has been attributable to non-cash
charges. Through December 31, 2004, our principal stockholders had deferred
approximately $187,000 of compensation due them pursuant to their employment
agreements, of which approximately $160,000 was contributed to capital on April
9, 2004. These deferrals and capital contributions have helped preserve our
liquidity. In December 2004, pursuant to a promissory note, our former Chief
Executive Officer loaned us $105,000, which will be repaid over 24 months,
beginning in January 2006. Additionally, in February and April 2005, in private
placements of its common stock, all of the individual members of our Board of
Directors and certain key employees purchased an aggregate of 775,000 shares of
our common stock at $.20 per share, resulting in proceeds to the Company of
$155,000. We are currently engaged in a number of financing activities,
including the procurement of bridge loans and equity financing. As a result of
our limited capital resources, however, our independent registered public
accounting firm has indicated in their report on our financial statements for
the year ended December 31, 2004 that there is a substantial doubt about our
ability to continue as a going concern. We believe, however, that as a result of
the proceeds from our financing activities, as well as anticipated cash flow to
be generated by fees from, and sales of, our RIS/PACS solution, we will be able
to continue to meet our obligations as they become due through at least December
31, 2005. We also believe, but cannot assure, that if needed, we will be able to
obtain additional capital resources from financing through financial
institutions and other unrelated sources and/or through additional related party
loans or equity transactions.

Our cost and expense increases are related, in large part, to our anticipated
future growth. We believe, however, that we have the ability to control the pace
of our expenditures relative to our available resources. Included in such
resources is the expectation of additional short-term loans and/or purchases of
additional common stock by the members of our Board of Directors, as well as
additional private placements of securities to unrelated third parties. There
are no commitments of financing nor can there be any assurance, that, if needed,
such loans or security purchases will be available. If necessary, we also have
the ability to reduce or curtail our planned level of activity. As a result of
the aforementioned, our financial statements have been prepared assuming the
Company will continue as a going concern and they do not include any adjustments
from the outcome of this uncertainty.

CRITICAL ACCOUNTING POLICIES

The Securities and Exchange Commission issued disclosure guidance for "critical
accounting policies." The Securities and Exchange Commission defines "critical
accounting policies" as those that require the application of management's most
difficult, subjective or complex judgments, often as a result of the need to
make estimates about the effect of matters that are inherently uncertain and may
change in subsequent periods.

Our significant accounting policies are described in Note 2 to our audited
financial statements, contained elsewhere in this report. We believe that the
following accounting policies or estimates require the application of
management's most difficult, subjective or complex judgments.

GOING CONCERN:

The accompanying audited financial statements have been prepared on the basis of
accounting principles applicable to a going concern. Accordingly, they do not
give effect to adjustments that would be necessary should we be unable to
continue as a going concern and, therefore, be required to realize our assets
and retire our liabilities in other than the normal course of business and at
amounts different from those in the accompanying audited financial statements.
Our ability to continue as a going concern is dependent upon achieving
profitable operations and/or obtaining additional financing. While our
management believes that both criteria will be achieved, there can be no
assurance as to either outcome.

REVENUE RECOGNITION:

Revenues from the provision of radiology and imaging services are recognized
over the estimated period during which the applicable services are performed
provided that the fees are fixed and determinable and collection is reasonably
assured.

Contracts for the sale of our imaging systems involve multiple elements
including the delivery and installation of software and hardware products,
training and system maintenance. However, we cannot allocate the revenues from
such contracts to each element based on the relative fair value of each element.
Accordingly, we will recognize the revenues from a system contract ratably over
the period during which we are required to provide maintenance or any other
service provided that the fees are fixed and determinable and collection is
reasonably assured. Unearned revenues, if any, are included in deferred revenues
in our balance sheet. At December 31, 2004, all amounts initially deferred were
fully amortized into revenue.

VALUATION OF DEFERRED TAX ASSETS:

We regularly evaluate our ability to recover the reported amount of our deferred
tax assets considering several factors, including our estimate of the likelihood
that we will generate sufficient taxable income in future years in which
temporary differences reverse. Presently we believe that it is more likely than
not that we will not realize a substantial portion of the benefit of our
deferred tax assets based primarily on our projected operating results and,
accordingly, have recorded a valuation allowance of $1,347,000. In the event
that actual results differ from our estimates or we adjust these estimates in
future periods, we may need to adjust this valuation allowance, which could
materially impact our financial position and results of operations.

VALUATION OF LONG-LIVED ASSETS:

We assess the recoverability of long-lived assets, such as equipment and
improvements, whenever we determine that events or changes in circumstances
indicate that their carrying amount may not be recoverable. Our assessment is
primarily based upon our estimate of future cash flows associated with these

assets. We have determined that there has not been an impairment of any of our
long-lived assets at December 31, 2004. However, should our operating results
deteriorate, we may determine that some portion of our long-lived assets is
impaired. Such determination could result in non-cash charges to income that
could materially affect our financial position and results of operations for
that period.

EFFECTS OF RECENT ACCOUNTING PRONOUNCEMENTS:

In April 2003, the FASB issued Statement of Financial Accounting Standards No.
149 "Amendment of Statement 133 on Derivative Instruments and Hedging
Activities. " The Company does not hold any material derivative instruments and
does not conduct any significant hedging activities.

In May 2003, the FASB issued SFAS No. 150 "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity" ("SFAS 150")
which requires an issuer to classify financial instruments that are within its
scope as liabilities. Many of those instruments were classified as equity under
previous guidance. Most of the guidance in SFAS 150 was effective for all
financial instruments entered into or modified after May 31, 2003, and otherwise
was effective at the beginning of the first interim period beginning after June
15, 2003. The Company adopted the guidance in the consensus in the quarter
beginning July 1, 2003. The adoption of the provisions of SFAS 150 did not have
any impact on the Company's financial statements.

In December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary
Assets" ("SFAS 153") which amends Accounting Principles Board Opinion No. 29,
"Accounting for Nonmonetary Transactions ("APB 29"). SFAS 153 amends APB 29 to
eliminate the fair-value exception for nonmonetary exchanges of similar
productive assets and replaces it with a general exception for nonmonetary
exchanges that do not have commercial substance. It is effective for nonmonetary
asset exchanges occurring in fiscal periods beginning after June 15, 2005. SFAS
153 is not anticipated to have a material impact on our financial position or
results of operations.

In December 2004, the FASB issued SFAS No. 123(R), "Share-Based Payment," as
subsequently revised in April 2005 ("SFAS 123(R)") which establishes accounting
standards for all transactions in which an entity exchanges its equity
instruments for goods and services. SFAS 123(R) revises SFAS No. 123,
"Accounting for Stock-Based Compensation," supersedes Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" and amends SFAS
No. 95, "Statement of Cash Flows." SFAS 123(R) generally requires the Company to
measure the cost of employee services received in exchange for an award of
equity instruments, including all options granted to employees, based on the
fair value of the award on the date of the grant. SFAS 123(R) requires the fair
value on the grant date to be estimated using either an option-pricing model
which is consistent with the terms of the award or a market observed price, if
such a price exists. The resulting cost must be recognized over the period
during which an employee is required to provide service in exchange for the
award, which is usually the vesting period. The Company has used the intrinsic
value method of accounting for options granted to employees and has not been
required to record any charges related to options granted. For small business
issuers, like the Company, SFAS 123(R) must be adopted no later than the
beginning of the next fiscal year that begins after periods beginning after
December 15, 2005 and the Company expects to adopt SFAS 123(R) on January 1,
2006. We expect that the adoption of SFAS 123(R) will require us to record
charges related to options granted to employees from time to time, but we cannot
determine presently whether those charges will have a material impact on our
results of operations and the related per-share amounts.

RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2004 COMPARED TO THE YEAR
ENDED DECEMBER 31, 2003

REVENUE:

During the year ended December 31, 2004, our total revenues increased $118,840,
or 15.3%, to $894,245 from $775,405 in the prior year. This net increase in
revenue is comprised of a $153,840, or 23.4%, increase in ASP usage fees from
our existing customers. One customer generated a full-year's ASP fee revenue in
2004, while a second customer's capital purchase payment revenue decreased
$35,000, or 25%, as the payments were completed in 2004. A third customer's ASP
usage fee revenue stream started in September 2004. We expect that we will
derive our revenues in the future primarily from sales of our WarpSpeed system
and associated maintenance charges along with ASP usage fees.

COST OF REVENUE:

During the year ended December 31, 2004, the cost of service revenues consisted
of Medical Director and related fees which was $102,629, approximately the same
as the $110,000 incurred in 2003. These costs ceased with the passing of Dr.
Ryon in December 2004.

RESEARCH AND DEVELOPMENT EXPENSES:

During the year ended December 31, 2004, we incurred research and development
expenses of $344,622 as compared with $342,000 in the preceding year. These
expenses consisted primarily of compensation to our Chief Technology Officer and
the engineering personnel, who continually develop refinements and enhancements
to our WarpSpeed system.

SALES AND MARKETING EXPENSES:

During the years ended December 31, 2004 and 2003, we incurred sales and
marketing expenses of $324,650 and $315,474, respectively, as we introduced our
products for sale. These expenses are expected to increase as our cash
availability allows us to make the investments in infrastructure, personnel and
other sales and marketing expenditures that we believe are necessary for us to
achieve our revenue goals.

GENERAL AND ADMINISTRATIVE EXPENSES:

During the year ended December 31, 2004, we incurred general and administrative
expenses of approximately $688,000 as compared to approximately $342,000 in the
prior year, an increase of $346,000. Of this amount, 38% (approximately
$130,000) is due to the accrual of a one-time charge in the fourth quarter of
2004, resulting from an arbitration proceeding with a former officer and
director of the Company. There was no comparable charge in 2003. The balance of
the increase is substantially attributable to compensation, travel, customer
support and infrastructure-related costs, as we continue our growth from a pure
development company to a more complete organization.

Our growth transition included the addition of two executive officers starting
in the second quarter of 2004. We expect that these costs will continue to
increase as we position ourselves to promote and administer our anticipated
expansion. We believe, however, that such expenditures are largely scalable and
controllable based on current and anticipated revenue streams and cash
availability.

NET LOSS:

As a result of the aforementioned, we incurred a loss of approximately $565,000
($.04 per share) for the year ended December 31, 2004 as compared to a loss of
approximately $335,000 ($.02 per share) for the year ended December 31, 2003.
Approximately 57% of the increase in net loss can be attributed to the accrual
of a one-time charge in the fourth quarter of 2004, the final result of an
arbitration proceeding with a former officer and director of the Company. There
was no comparable charge in 2003.

LIQUIDITY AND CAPITAL RESOURCES:

As of December 31, 2004, we had cash and cash equivalents of $4,000 and a
working capital deficiency of approximately $304,000 compared with a cash
position of $195,000 and working capital of $67,000, respectively in 2003.

During 2004, our operating activities utilized approximately $459,000 of cash.
This arose primarily from our net loss of approximately $565,000 as adjusted for
non-cash charges of $67,000, netting to $498,000, plus a net increase in assets
aggregating $11,000 (resulting from an increase in prepaid expenses of $16,000,
as partially offset by a decrease in accounts receivable of approximately
$5,000) and a net increase in liabilities of $50,000 (resulting from an increase
in accounts payable and accrued expenses of $98,000 and an increase in accrued
compensation payable to stockholders of $45,000, as partially offset by a
decrease in deferred revenues of $93,000 ). During 2003, our operating
activities utilized approximately $251,000 of cash. This arose primarily from
our net loss of approximately $335,000 and an increase in accounts receivable of
approximately $66,000. These uses of cash were partially offset by non-cash
charges aggregating approximately $34,000 and an increase in accounts payable
and accrued expenses of approximately $90,000 and accrued compensation of
approximately $18,000.

Additionally, during 2004, our investing activities used approximately $86,000,
primarily to purchase equipment placed in service to generate revenue. During
2003, we used cash of approximately $143,000 for the acquisition of equipment.

These net uses of cash in 2004 were partially offset by our financing activities
which generated an aggregate of approximately $354,000, with the proceeds of
notes and long-term debt aggregating approximately $367,000, plus $50,000 in
proceeds from the sale of our common stock, less principal payments on the debt
of approximately $63,000.

In September 2002, we applied for, and received, a line of credit from M & T
Bank, renewable annually, in the amount of $75,000. At December 31, 2004,
outstanding borrowings approximated $64,000.

In February and March 2004, we borrowed an aggregate of $264,000 from Valley
Commercial Capital, LLC ("Valley"). These loans require aggregate monthly
payments of principal and interest of $8,300 through February 2007 and $4,400 in
March 2007. As of December 31, 2004, the outstanding balances on these loans
aggregated $201,000. Principal payments are approximately $94,000, $90,000 and
$17,000 in 2005, 2006 and 2007, respectively

In January 2004, we closed a five-year contract for the WarpSpeed system with
St. Anthony Community Hospital, Warwick, NY. St. Anthony Community Hospital is a
member of Bon Secours Charity Health System, which owns and operates 32 health
care facilities.

In December 2004, we borrowed $105,000 from our former Chief Executive Officer,
which will be repaid over 24 months, beginning in January 2006. Principal
payments are $52,500 in 2006 and 2007.

In March 2005, the Company signed a contract for the sale of two of its
WarpSpeed RIS/PACS systems to InMed Diagnostic Services of Massachusetts, LLC at
multi-modality imaging centers specializing in women's health care, and one
WarpSpeed system to InMed Diagnostics Services of South Carolina, LLC in
Columbia, South Carolina. The South Carolina site is the largest imaging center
of the InMed affiliates.

We have employment commitments through December 2005 that require us to pay
minimum annual cash compensation of $150,000 to each of our two executive
officers.

ITEM 7. FINANCIAL STATEMENTS

Financial Statements

INDEX TO FINANCIAL STATEMENTS

PAGE
----

Report of Independent Registered Public Accounting Firm 14

Balance Sheet
December 31, 2004 15

Statements of Operations
Years Ended December 31, 2004 and 2003 16

Statements of Changes in Stockholders' Deficiency
Years Ended December 31, 2004 and 2003 17

Statements of Cash Flows
Years Ended December 31, 2004 and 2003 18

Notes to Financial Statements 19-28

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
-------------------------------------------------------

To the Board of Directors and Stockholders Image Technology Laboratories, Inc.

We have audited the accompanying balance sheet of Image Technology Laboratories,
Inc. as of December 31, 2004, and the related statements of operations, changes
in stockholders' deficiency and cash flows for the years ended December 31, 2004
and 2003. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Image Technology Laboratories,
Inc. as of December 31, 2004, and its results of operations and cash flows for
the years ended December 31, 2004 and 2003, in conformity with accounting
principles generally accepted in the United States of America.

The financial statements referred to above have been prepared assuming that the
Company will continue as a going concern. As further discussed in Notes 1 and 2
to the financial statements, among other things, the Company's operations have
generated recurring losses and negative cash flows from operating activities,
and it had working capital and stockholders' deficiencies at December 31, 2004.
Such matters raise substantial doubt about the Company's ability to continue as
a going concern. Management's plans concerning these matters are described in
Note 1. The accompanying financial statements as of and for the year ended
December 31, 2004 do not include any adjustments that might result from the
outcome of this uncertainty.

/S/ J.H. COHN LLP

ROSELAND, NEW JERSEY
APRIL 28, 2005

IMAGE TECHNOLOGY LABORATORIES, INC.

BALANCE SHEET
DECEMBER 31, 2004

ASSETS

CURRENT ASSETS:

Cash $ 4,212

Accounts receivable 61,048

Prepaid expenses and other current assets 17,067
-----------
TOTAL CURRENT ASSETS 82,327

Equipment and improvements, net 196,233
-----------
TOTAL $ 278,560
===========

LIABILITIES AND STOCKHOLDERS' DEFICIENCY

CURRENT LIABILITIES:

Notes payable $ 65,407
Current portion of long-term debt 93,633
Current portion of notes payable to stockholders 3,400
Accounts payable and accrued expenses 223,695
-----------
TOTAL CURRENT LIABILITIES 386,135

Long-term debt, less current portion 107,130
Notes payable to stockholders, less current portion 105,000
Accrued compensation payable to stockholders 27,072
-----------
TOTAL LIABILITIES 625,337
-----------

COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIENCY
Preferred stock, par value $.01 per share; 5,000,000 shares
authorized; 1,500,000 shares issued and outstanding 15,000
Common stock, par value $.01 per share; 50,000,000 shares

authorized; 13,863,778 shares issued and outstanding 138,638
Additional paid-in capital 2,866,297
Accumulated deficit (3,366,712)
-----------
TOTAL STOCKHOLDERS' DEFICIENCY (346,777)
-----------
TOTAL $ 278,560
===========

SEE NOTES TO FINANCIAL STATEMENTS.

IMAGE TECHNOLOGY LABORATORIES, INC.

STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2004 AND 2003

2004 2003
---- ----
REVENUE:

Service $ 789,245 $ 635,405
Software license fees 105,000 140,000
------------ ------------
TOTAL REVENUE 894,245 775,405

COST OF REVENUE 102,629 110,000
------------ ------------
GROSS PROFIT 791,616 665,405
------------ ------------

EXPENSES:

Research and development 344,622 342,000
Sales and marketing 324,650 315,474
General and administrative 687,768 342,458
------------ ------------

TOTALS 1,357,040 999,932
------------ ------------

NET LOSS $ (565,424) $ (334,527)
============ ============

NET LOSS PER COMMON SHARE:
Basic and diluted $ (0.04) $ (0.02)
============ ============

AVERAGE NUMBER OF SHARES USED IN COMPUTATION:
Basic and diluted 15,338,642 14,247,717
============ ============

SEE NOTES TO FINANCIAL STATEMENTS.

IMAGE TECHNOLOGY LABORATORIES, INC.

STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY
YEARS ENDED DECEMBER 31, 2004 AND 2003

PREFERRED STOCK COMMON STOCK
-------------------------- -------------------------- ADDI- TOTAL
NUMBER NUMBER TIONAL ACCUMU- STOCK-
OF OF PAID-IN LATED HOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT DEFICIENCY
------ ------ ------ ------ ------- ------- ----------

Balance, January 1, 2003 1,500,000 $ 15,000 12,232,462 $122,325 $1,827,395 $(2,466,761) $ (502,041)

Sales of common stock
in private placement

500,000 5,000 165,000 170,000

Return of common stock
in dispute resolution

(200,000) (2,000) 2,000 -

Issuance of common stock
upon warrant exercise

1,188,816 11,888 209,206 221,094

Issuance of common stock to
directors for services 30,000 300 8,700 9,000

Accrued compensation
contributed to capital

426,004 426,004

Net loss (334,527) (334,527)
------------ ---------- ------------ ----------- ------------ -------------- -------------

Balance,
December 31, 2003 1,500,000 15,000 13,751,278 137,513 2,638,305 (2,801,288) (10,470)

Issuance of common stock in
private placement 100,000 1,000 49,000 50,000

Issuance of common stock and
options for services 12,500 125 19,300 19,425

Accrued compensation
contributed to capital

159,692 159,692

Net loss (565,424) (565,424)
------------ ----------- ------------ ----------- ------------ -------------- -------------

Balance,
December 31, 2004 1,500,000 $ 15,000 13,863,778 $138,638 $2,866,297 $(3,366,712) $(346,777)
============ =========== ============ =========== ============ ============== =============

SEE NOTES TO FINANCIAL STATEMENTS.

IMAGE TECHNOLOGY LABORATORIES, INC.

STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2004 AND 2003

2004 2003
---- ----
OPERATING ACTIVITIES:

Net loss $(565,424) $(334,527)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization of equipment
and improvements 47,097 24,535

Common stock and options issued for services 19,425 9,000
Changes in operating assets and liabilities:

Accounts receivable 5,332 (66,380)

Prepaid expenses and other current assets (15,512) 8,441
Accounts payable and accrued expenses 98,266 90,182

Deferred revenue (93,333) -
Accrued compensation payable to stockholders 44,764 17,962
------------- -------------

NET CASH USED IN OPERATING ACTIVITIES (459,385) (250,787)
------------- -------------

INVESTING ACTIVITIES - PURCHASE OF EQUIPMENT AND IMPROVEMENTS (85,878) (142,656)
------------- -------------

FINANCING ACTIVITIES:
Proceeds from notes payable and long-term debt 262,451 66,952

Repayment of notes payable and long-term debt (63,233) -

Proceeds from (repayment of) loan from stockholders 105,000 (1,800)

Proceeds from exercise of warrants - 221,094
Proceeds from private placement of common stock 50,000 170,000
------------- -------------

NET CASH PROVIDED BY FINANCING ACTIVITIES 354,218 456,246
------------- -------------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (191,045) 62,803

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 195,257 132,454
------------- -------------

CASH, END OF YEAR $ 4,212 $195,257
============= =============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 18,760 $ 2,305
============= =============

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Contribution of accrued compensation payable to stockholders to
capital $ 159,692 $ 426,004
============= =============

SEE NOTES TO FINANCIAL STATEMENTS.

IMAGE TECHNOLOGY LABORATORIES, INC.

NOTES TO FINANCIAL STATEMENTS

NOTE 1 - BUSINESS:
Image Technology Laboratories, Inc. (the "Company") was incorporated on December
5, 1997 and commenced operations on January 1, 1998. The Company has developed
software for a single database "Radiology Information System/Picture Archiving
and Communication System", known as RIS/PACS for use in the management of
patient information and medical images by hospitals and diagnostic imaging
centers. The "PACS" portion of the system inputs and stores diagnostic images in
digital format from original imaging sources such as: Computerized Tomography
(CT), Magnetic Resonance Imaging (MRI), Ultrasound, Nuclear Imaging, Digital
Mammography, Digital Fluoroscopy and Radiography.

The "RIS" portion of the system inputs and stores patient demographics, along
with the appropriate insurance, billing and scheduling information required to
complete the patient's visit. All of the data is retained in standard formats,
including the DICOM and HL-7 standards.

The Company will derive its revenues in the future primarily from sales of its
WarpSpeed system and associated maintenance charges along with Application
Service Provider (ASP) usage fees. The Company obtained its first contract for
the sale of its WarpSpeed system and maintenance services in August 2002.
Accordingly, the Company is no longer in the development stage for accounting
purposes, but continues to refine and enhance the capabilities of its WarpSpeed
system.

The Company has incurred recurring losses and negative cash flows from operating
activities since its inception. The Company had cash of $4,212, a working
capital deficiency of approximately $304,000 and a stockholders' deficiency of
$346,777 as of December 31, 2004. Management expects a reduction in the level of
such losses now that sales of the products have commenced. A substantial portion
of the Company's historical losses have been attributable to non-cash charges.
In December 2004, pursuant to a promissory note, the Company's former Chief
Executive Officer loaned the Company $105,000.

In February 2005, the Company concluded a private placement of its common stock
with each member of its Board of Directors and two key employees. Pursuant to
such transaction, the Company sold an aggregate of 525,000 shares at $.20 per
share, the approximate fair value on the date of closing, resulting in aggregate
proceeds to the Company of $105,000.

In April 2005, the Company concluded a private placement of its common stock
with the Chairman of its Board of Directors. Pursuant to such transaction, the
Company sold an aggregate of 250,000 shares at $.20 per share, the approximate
fair value on the date of closing, resulting in aggregate proceeds to the
Company of $50,000.

In March 2005, the Company signed a contract for the sale of two of its
WarpSpeed RIS/PACS systems to InMed Diagnostic Services of Massachusetts, LLC at
multi-modality imaging centers specializing in women's health care, and one
WarpSpeed system to InMed Diagnostics Services of South Carolina, LLC in
Columbia, South Carolina. The South Carolina site is the largest imaging center
of the InMed affiliates.

Management believes that as a result of the proceeds from these financing
activities, as well as anticipated cash flow generated by sales of its RIS/PACS
solution, the Company will be able to continue to meet its obligations as they
become due through at least December 31, 2005. Management also believes, that if
needed, the Company will be able to obtain additional capital resources from
financing through financial institutions and other unrelated sources and/or
through additional related party loans and private placements. However, there
can be no assurance that the Company's operations will become profitable or that
financing will be available. Accordingly, the accompanying financial statements
do not include any adjustments to reflect the possible future effects on the
recoverability and classification of assets or the amount and classification of
liabilities that may result from the outcome of this uncertainty.

IMAGE TECHNOLOGY LABORATORIES, INC.

NOTES TO FINANCIAL STATEMENTS

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
GOING CONCERN UNCERTAINTY:
As discussed in Note 1, the Company has had continuing losses and negative cash
flow from operating activities since inception. The accompanying financial
statements have been prepared on the basis of accounting principles applicable
to a going concern. Accordingly, they do not give effect to adjustments that
would be necessary should the Company be unable to continue as a going concern
and, therefore, be required to realize its assets and retire its liabilities in
other than the normal course of business and at amounts different from those in
the accompanying financial statements. The Company's ability to continue as a
going concern is dependent upon achieving profitable operations and/or obtaining
additional financing. While management of the Company believes that both
criteria will be achieved, there can be no assurance as to either outcome.
Management's plans as to these matters are discussed further in Note 1.

USE OF ESTIMATES:
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.

CASH EQUIVALENTS:
Cash equivalents include all highly liquid investments with an original maturity
of three months or less when acquired. At December 31, 2004, the Company has no
cash equivalents.

REVENUE RECOGNITION:
Revenue from the provision of radiology and imaging services are recognized over
the estimated period during which the applicable services are performed provided
that the fees are fixed and determinable and collection is reasonably assured.

Contracts for the sale of the Company's imaging systems involve multiple
elements including the delivery and installation of software and hardware
products, training and system maintenance. However, the Company cannot allocate
the revenue from such contracts to each element based on the relative fair value
of each element. Accordingly, it recognizes the revenue from a systems contract
ratably over the period during which it is required to provide maintenance or
any other services provided that the fees are fixed and determinable and
collection is reasonably assured.

Any unearned revenue would be included in deferred revenue in the balance sheet.
At December 31, 2004, the Company had no unearned revenue.

The Company derived substantially all of its revenues in both 2004 and 2003 from
a limited number of customers, and all of its accounts receivable are also from
these same few customers. The Company closely monitors the extension of credit
to its customers while maintaining allowances, if necessary, for potential
credit losses. On a periodic basis, the Company evaluates its accounts
receivable and establishes an allowance for doubtful accounts, based on a
history of past write-offs, and collections and current credit conditions.
Management does not believe that significant credit risk exists with respect to
accounts receivable at December 31, 2004.

CONCENTRATIONS OF CREDIT RISK:
Financial instruments which potentially subject the Company to concentrations of
credit risk consist primarily of cash and cash equivalents and accounts
receivable. The Company places its cash and cash equivalents with high-quality
financial institutions. At times, the Company's cash and cash equivalent
balances exceed the insured amount under the Federal Deposit Insurance
Corporation of $100,000.

IMAGE TECHNOLOGY LABORATORIES, INC.

NOTES TO FINANCIAL STATEMENTS

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

EQUIPMENT AND LEASEHOLD IMPROVEMENTS:
Equipment and leasehold improvements are stated at cost. Depreciation of
equipment is provided using accelerated methods over the estimated useful lives
of the assets, which range from five to seven years. Leasehold improvements are
amortized over the lesser of the estimated useful life of the asset or the term
of the lease.

IMPAIRMENT OF LONG-LIVED ASSETS:
Impairment losses on long-lived assets, such as equipment and improvements, are
recognized when events or changes in circumstances indicate that the
undiscounted cash flows estimated to be generated by such assets are less than
their carrying value and, accordingly, all or a portion of such carrying value
may not be recoverable. Impairment losses are then measured by comparing the
fair value of assets to their carrying amounts.

INCOME TAXES:
The Company accounts for income taxes pursuant to the asset and liability method
which requires deferred income tax assets and liabilities to be computed for
temporary differences between the financial statement and tax bases of assets
and liabilities that will result in taxable or deductible amounts in the future
based on enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount expected
to be realized. The income tax provision or credit is the tax payable or
refundable for the period plus or minus the change during the period in deferred
tax assets and liabilities.

NET EARNINGS (LOSS) PER COMMON SHARE:
The Company presents "basic" earnings (loss) per common share and, if
applicable, "diluted" earnings per common share pursuant to the provisions of
Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS
128"). Basic earnings (loss) per common share is calculated by dividing net
income or loss applicable to common stock by the weighted average number of
common shares outstanding during each period. The calculation of diluted
earnings per common share is similar to that of basic earnings per common share,
except that the denominator is increased to include the number of additional
common shares that would have been outstanding if all potentially dilutive
common shares, such as those issuable upon the exercise of stock options and
warrants, were issued during the period. The rights of the Company's preferred
and common stockholders are substantially equivalent. The Company has included
the 1,500,000 preferred shares outstanding in the weighted average number of
common shares outstanding in the computation of basic loss per share for the
years ended December 31, 2004 and 2003 in accordance with the "two class" method
of computing earnings (loss) per share set forth in SFAS 128.

Since the Company had net losses in 2004 and 2003, the assumed effects of the
exercise of 2,150,000 and 3,000,000 options outstanding at December 31, 2004 and
2003, respectively, were not considered in the computation of loss per share as
they would have been anti-dilutive.

IMAGE TECHNOLOGY LABORATORIES, INC.

NOTES TO FINANCIAL STATEMENTS

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

STOCK OPTIONS:
In accordance with the provisions of Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25"), the Company will
recognize compensation costs as a result of the issuance of stock options to
employees based on the excess, if any, of the fair value of the underlying stock
at the date of grant or award (or at an appropriate subsequent measurement date)
over the amount the employee must pay to acquire the stock. Therefore, the
Company will not be required to recognize compensation expense as a result of
any grants of stock options at an exercise price that is equivalent to or
greater than fair value. The Company has elected to continue to account for
employee stock options using the intrinsic method under APB 25, and by making
that election it is required by Statement of Financial Accounting Standards No.
123 "Accounting for Stock Based Compensation ("SFAS 123") and SFAS 148
"Accounting for Stock Based Compensation-Transition and Disclosure"("SFAS 148")
to provide pro forma disclosures of net loss and loss per share as if a fair
value added method of accounting has been applied.

The pro forma amounts computed as if the Company had elected to recognize
compensation cost for all stock options granted to employees based on the fair
value of the options at the date of grant and the amortization of such cost over
the vesting period as prescribed by SFAS 123 and the related historical amounts
reported in the accompanying 2004 statement of operations are set forth below
(Proforma amounts for 2003 are not presented because they did not differ
materially from the historical amounts):

2004
---------

Net loss - as reported $(565,424)
Deduct total based employee based compensation expense
determined under a fair value based method for all
awards, net of related taxes (30,000)
--------
Net loss - pro forma
Loss per share: (595,424)
========
Basic loss per share - as reported $(.04)
========
Basic loss per share - pro forma $(.04)
========

The fair value of each option granted was estimated as of the date of grant
using the Black-Scholes Option-Pricing-Model with the following weighted average
assumptions:

IMAGE TECHNOLOGY LABORATORIES, INC.

NOTES TO FINANCIAL STATEMENTS

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

Expected volatility 99.9%
Risk-free interest rate 3.5%
Expected years of option term 10
Expected dividends 0%

As a result of amendments to SFAS 123, the Company will be required to expense
the fair value of employee stock options over the vesting period beginning with
its fiscal quarter ending March 31, 2006.

RECLASSIFICATIONS:
Certain accounts in the 2003 financial statements have been reclassified to
conform to the 2004 presentation.

NOTE 3 - EQUIPMENT AND IMPROVEMENTS:
Equipment and improvements consist of the following at December 31, 2004:

Equipment $ 270,580
Furniture 8,111
Leasehold improvements 3,505
----------
Total 282,196
Less accumulated depreciation and amortization 85,963
----------

Total $196,233
========

Depreciation and amortization expense amounted to $47,097 and $24,535 in 2004
and 2003, respectively.

NOTE 4 - NOTES PAYABLE TO STOCKHOLDERS:
During November and December 2004, Dr. David Ryon, the Company's principal
stockholder, President and Chief Executive Officer until his death in December
2004, loaned the Company an aggregate of $105,000. In December 2004, to
memorialize this loan, he executed, as President and Chief Executive Officer, on
behalf of the Company, a demand promissory note payable to himself and bearing
interest at 10% per annum. He also executed a security agreement, for himself on
behalf of the Company, granting to himself a security interest in all of the
Company's assets not previously encumbered as security for full payment under
the note. Prior to April 12, 2005, the Company negotiated with the Estate of
David Ryon a 24 month payment schedule, beginning in January 2006. The Company's
Board of Directors approved the revised terms of the promissory note on April
12, 2005. The entire principal amount of $105,000 was outstanding at December
31, 2004. Principal payments of $52,500 are required in both 2006 and 2007.

Notes payable to stockholders with a principal balance of $3,400 at December 31,
2004 are non-interest bearing and are due on demand.

IMAGE TECHNOLOGY LABORATORIES, INC.

NOTES TO FINANCIAL STATEMENTS

NOTE 5 - LONG-TERM DEBT:
In February 2004, the Company borrowed $125,000 from Valley Commercial Capital,
LLC ("Valley"). This loan is evidenced by a promissory note, which provides for
interest at 8% per annum and calls for monthly payments of principal and
interest of $3,917 through February 2, 2007. In March 2004, the Company borrowed
an additional $138,997 from Valley, also evidenced by a promissory note, which
provides for interest at 8% per annum and calls for monthly payments of
principal and interest of $4,356 through March 29, 2007. As of December 31,
2004, the outstanding balances on these loans aggregated $200,763. Principal
payments of $93,633, $90,135 and $16,695 are required in 2005, 2006 and 2007,
respectively. These loans are secured by the personal guarantee of the Estate of
Company's principal stockholder.

NOTE 6 - ACCRUED COMPENSATION PAYABLE TO STOCKHOLDERS:
Effective April 9, 2004, the two principal stockholders of the Company
contributed to capital the balance of the amounts of compensation owing to them
at March 31, 2004, an aggregate of $159,692. Such aggregate amount has been
included in additional paid-in capital in the Company's balance sheet at
December 31, 2004. During 2003, the Company's principal stockholder contributed
to capital $426,004 of compensation owed to him. As of December 31, 2004,
accrued compensation payable to the Company's principal stockholder was $27,072.

NOTE 7 - STOCKHOLDERS' DEFICIENCY:
PREFERRED STOCK:
As of December 31, 2004, the Company was authorized to issue up to 5,000,000
shares of preferred stock with a par value of $.01 per share. Under the
Company's Articles of Incorporation, the Board of Directors, within certain
limitations and restrictions, can fix or alter preferred stock dividend rights,
dividend rates, conversion rights, voting rights and terms of redemption
including price and liquidation preferences.

PRIVATE PLACEMENT OF COMMON SHARES:
During December 2003, the Company completed a private placement pursuant to
which it sold 500,000 shares of common stock to its principal stockholder at
$.34 per share (the approximate fair value of the shares at the time of sale)
and received proceeds of $170,000.

During March 2004, the Company completed a private placement pursuant to which
it sold 100,000 shares of common stock to Robert Carpenter, a member of its
Board of Directors, at $.50 per share (the approximate fair value of the shares
at the time of sale) and received proceeds of $50,000.

SHARES ISSUED FOR SERVICES:
During January 2002, the Company agreed to issue 450,000 shares of common stock
and warrants to purchase 100,000 shares of common stock in exchange for the
provision of marketing services by an investor relations firm. The Company
recorded the fair value of the shares of $112,500 on the date of the agreement
as unearned marketing expense. The shares and warrants became issuable and were
issued in June 2002. The warrants were exercisable at $3.00 per share during the
two-year period subsequent to the date of issuance.

Under the agreement, the investor relations firm was required to provide the
marketing services over the six-month period that commenced in July 2002, and
the Company amortized the unearned marketing expense over that period. However,
during that period, disputes arose related to those services. On December 31,
2002, the disputes were resolved and the investor relations firm agreed to
return 200,000 shares of common stock and allow the Company to cancel the
warrants it had issued for the purchase of 100,000 shares. During 2003, the
investor relations firm returned the 200,000 shares of common stock and the
Company cancelled them.

IMAGE TECHNOLOGY LABORATORIES, INC.

NOTES TO FINANCIAL STATEMENTS

NOTE 7 - STOCKHOLDERS' DEFICIENCY (CONTINUED):

In April 2004, the Company agreed to issue to a financial consultant, acting as
its Chief Financial Officer, 50,000 shares of its common stock as compensation.
Pursuant to the consulting agreement, 25% of such shares vested and were issued
as of April 20, 2004, (the "Effective Date") and 25% of such shares vest and are
to be issued on each of the first, second and third anniversaries of the
Effective Date. Accordingly, the Company recorded a compensation charge of
$10,625 in the second quarter of 2004 for the vested 12,500 shares at $.85 per
share, the closing price of the Company's common stock on the Effective Date. As
a result of the consultant's resignation on January 7, 2005, the Company has no
obligation to issue additional shares.

DIRECTORS' FEES:
During September 2003, the Company issued to its Board of Directors a total of
30,000 shares of common stock as directors' fees. The Company recorded the fair
value of the shares of $9,000 as an expense on the date they agreed to issue
them.

NOTE 8 - INCOME TAXES:
As of December 31, 2004, the Company had net operating loss carryforward of
approximately $3,340,000 available to reduce future Federal and state taxable
income that will expire at various dates through 2024. The Company's only other
material temporary difference as of that date was approximately $27,000
attributable to accrued officers' compensation. Due to the uncertainties related
to, among other things, the possible future changes in the ownership of the
Company, which could subject those loss carryforwards to substantial annual
limitations, and the extent and timing of its future taxable income, the Company
offset the potential benefits of its deferred tax assets of approximately
$1,347,000 (of which $1,336,000 was attributable to the net operating loss
carryforwards and $11,000 was attributable to the future deductibility of the
officers' compensation) by an equivalent valuation allowance as of December 31,
2004.

The Company had also offset the potential benefits of its deferred tax assets of
approximately $1,120,000 (of which $1,063,000 was attributable to the net
operating loss carryforwards and $57,000 was attributable to the future
deductibility of the officers' compensation) and $987,000 (of which $767,000 was
attributable to the net operating loss carryforwards and $220,000 was
attributable to the future deductibility of the officers' compensation) by
equivalent valuation allowances as of December 31, 2003 and 2002, respectively.
As a result of the increases in the valuation allowance of $227,000 and $133,000
in 2004 and 2003, respectively, there are no benefits for income taxes reflected
in the accompanying statements of operations to offset pre-tax losses.

NOTE 9 - FAIR VALUE OF FINANCIAL INSTRUMENTS:
The Company's financial instruments at December 31, 2004 for which disclosure of
estimated fair value is required by certain accounting standards consisted of
cash, accounts receivable, accounts payable and accrued expenses, notes payable,
notes payable to stockholders and accrued compensation payable to stockholders.
In the opinion of management, cash, accounts receivable, accounts payable and
accrued expenses, and notes payable were carried at fair value because of their
liquidity and short-term maturities. Because of the relationship of the Company
and its stockholders, there is no practical method that can be used to determine
the fair value of the notes payable to stockholders and accrued compensation
payable to stockholders.

IMAGE TECHNOLOGY LABORATORIES, INC.

NOTES TO FINANCIAL STATEMENTS

NOTE 10 - STOCK OPTION PLAN:
In January 1998, the Company's stockholders ratified the Company's Stock Option
Plan (the "Plan") whereby options for the purchase of up to 5,000,000 shares of
the Company's common stock may be granted to key personnel in the form of
incentive stock options and nonqualified stock options, as defined under the
Internal Revenue Code. Key personnel eligible for these awards include employees
of the Company, consultants to the Company and non-employee directors of the
Company. Under the Plan, the exercise price of all options must be at least 100%
of the fair market value of the Company's common shares on the date of grant
(the exercise price of an incentive stock option granted to an optionee that
holds more than 10% of the combined voting power of all classes of stock of the
Company must be at least 110% of the fair market value on the date of grant).
The maximum term of any stock option granted may not exceed ten years from the
date of grant and options generally vest over three years.

Also, in connection with an agreement with a financial consultant (see Note 7),
the Company recorded a compensation charge of $8,800 in the second quarter of
2004 for the fair value of options to purchase 12,500 shares at $.85 per share
that vested in 2004.

Effective May 5, 2004 (the "Employment Date"), the Company entered into an
employment agreement with its Chief Operating Officer. Pursuant to the terms of
such agreement, the duration of which is four years from the Employment Date,
the Chief Operating Officer is to be paid an annual base salary, initially, of
$125,000, increasing to $150,000 on August 1, 2004, subject to subsequent
periodic reviews. He is eligible to participate in all of the Company's
incentive plans. Additionally, the Company issued to the Chief Operating Officer
options to purchase 100,000 shares of its common stock. The options vest 25% on
the first anniversary of the Employment Date and 25% on each of the succeeding
three anniversaries of the Employment Date. The exercise price of the options is
$.75 per share, the opening price of the Company's common stock on the
Employment Date.

No other options were issued in 2004.

IMAGE TECHNOLOGY LABORATORIES, INC.

NOTES TO FINANCIAL STATEMENTS

NOTE 10 - STOCK OPTION PLAN (CONTINUED):

The following table summarizes information about stock options outstanding at
December 31, 2004.

Options Outstanding Options Exercisable
-------------------------------------------- -------------------------
Weighted
Number Average Weighted Number Weighted
Exercise Outstanding Remaining Average Outstanding Average
Price at December Contractual Exercise at December Exercise
Range 31, 2004 Life (Years) Price 31, 2004 Price
----- -------- ------------ ----- -------- -----

$ 0.33 2,000,000 2.7 $ 0.33 1,600,000 $ 0.33

$ 0.75 100,000 9.3 $ 0.75 - $ 0.75

$ 0.85 50,000 9.3 $ 0.85 12,500 $ 0.85
------------- ------------ ----------- ------------- -----------
2,150,000 3.2 $ 0.40 1,612,500 $ 0.33
============= ============ =========== ============= ===========

Upon the resignation of the financial consultant in January 2005, his options
for 50,000 shares at $.85 per share were canceled.

NOTE 11 - WORKING CAPITAL LOAN AGREEMENT:

During September 2002, the Company entered into a one-year working capital loan
agreement. The agreement automatically renews annually with a financial
institution for borrowings of up to $75,000 unless one of the parties gives
appropriate notice for cancellation. Outstanding borrowings bear interest
payable monthly at 1% above the prime rate, and are guaranteed by the Estate of
the Company's principal stockholder. At December 31, 2004, there was $64,407
outstanding under this agreement.

NOTE 12 - LEGAL PROCEEDINGS

The Company was party to an arbitration proceeding commenced by Dr. Carlton
Phelps before the American Arbitration Association in New York City. Dr. Phelps,
a former officer and director of the Company, claimed that he had been
constructively discharged in violation of his employment agreement by virtue of
a significant diminution of his duties and responsibilities at the Company. He
also claimed that he had been defamed in the Company's public filings when it
was asserted that he had been discharged for cause. The Company denied the
allegations and affirmatively sought the return by Dr. Phelps of some or all of
his stock on the basis of his breach of fiduciary responsibilities. By Opinion
and Award dated February 25, 2004, the Arbitrator determined that Dr. Phelps had
not been constructively discharged, but had voluntarily resigned. As a
consequence, all of Dr. Phelps' claims for monetary awards were dismissed but,
as to the defamation claim, the Company was directed to amend prior filings to
reflect that he was not terminated for cause. The Company's claim for return of
Dr. Phelps's stock was denied. On September 15, 2004, the Arbitrator awarded
attorneys' fees and arbitration expenses totaling $120,810 and $9,250,
respectively, to Dr. Phelps. The Arbitrator's award has not yet been confirmed.
A total of $130,060 has been added to the expenses in the Company's 2004
Statement of Operations and the liabilities have been increased by the same
amount in the Company's Balance Sheet as of December 31, 2004.

IMAGE TECHNOLOGY LABORATORIES, INC.

NOTES TO FINANCIAL STATEMENTS

NOTE 13 - SUBSEQUENT EVENTS:

In March 2005, the Company signed a contract for the sale of two of its
WarpSpeed RIS/PACS systems to InMed Diagnostic Services of Massachusetts, LLC at
multi-modality imaging centers specializing in women's health care, and one
WarpSpeed system to InMed Diagnostics Services of South Carolina, LLC in
Columbia, South Carolina. The South Carolina site is the largest imaging center
of the InMed affiliates.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

ITEM 8A. CONTROLS AND PROCEDURES.

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

We carried out an evaluation under the supervision and with the participation of
our management, including our Chief Executive Officer who is our Principal
Accounting Officer, of the design and effectiveness of our disclosure controls
and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as of the end of the
period covered by this report. Based on the evaluation of our disclosure
controls and procedures, our Chief Executive Officer who is our Principal
Accounting Officer has concluded that, as of the end of the period covered by
this report, our disclosure controls and procedures were effective. It should be
noted that the design of any system of controls is based in part upon certain
assumptions about the likelihood of future events, and can therefore only
provide reasonable, not absolute, assurance that the design will succeed in
achieving its stated goals.

CHANGES IN INTERNAL CONTROLS

There were no significant changes in our internal controls over financial
reporting during the fourth quarter of the year ended December 31, 2004 that
materially affected, or are reasonably likely to materially affect, our internal
controls over financial reporting.

PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS, COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT

The Company hereby incorporates by reference the sections entitled "Election of
Directors" contained at pages 1 through 3 and the section entitled "Section
16(a) Beneficial Ownership Reporting Compliance" contained at page 3 of the
Proxy Statement filed electronically with the Securities and Exchange Commission
on or about April 28, 2005.

CODE OF ETHICS
We have adopted a code of ethics that applies to our executive officers, a copy
of which has been filed with this report on Form 10-KSB as Exhibit 13. Persons
who would like a copy of such code of ethics may receive one without charge upon
request made to Investor Relations, Image Technology Laboratories, Inc., 602
Enterprise Drive, Kingston, New York 12401.

ITEM 10. EXECUTIVE COMPENSATION

The Company hereby incorporates by reference the section entitled "Executive
Compensation" contained at pages 5 through 7 of the Proxy Statement referenced
immediately above.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth, as of December 31, 2004, the number of shares of
the Company's common stock (the "Common Stock") beneficially owned by all
persons known to be holders of more than five percent (5%) of the Common Stock
and by all executive officers and directors of the Company individually and as a
group.

SECURITY OWNERSHIP OF MANAGEMENT
(A) SECURITY OWNERSHIP OF MANAGEMENT.
The Company hereby incorporates by reference the section entitled "Securities
Ownership of Certain Beneficial Owners and Management" contained at page 4 of
the Proxy Statement.

(B) CHANGES IN CONTROL.
The Company is not aware of any arrangements, including any pledge by any person
of securities of the Company, the operation of which may, at a subsequent date,
result in a change in control of the Company.

ITEM 12: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Company hereby incorporates by reference the section entitled "Certain
Relationships and Related Transactions" on page 7 of the Proxy Statement.

ITEM 13. EXHIBITS

Refer to the list of Exhibits, which are being filed as a part of this report.

A. EXHIBITS

EXHIBIT NO. DESCRIPTION
----------- -----------
3.1* Certificate of Incorporation of Image Technology Laboratories, Inc.
3.2* Certificate of Amendment to Certificate of Incorporation of Image
Technology Laboratories, Inc. dated December 23, 1999
3.3* By-Laws of Image Technology Laboratories, Inc.
4.1* Specimen certificate for common stock of Image Technology
Laboratories, Inc.
4.2* Specimen certificate for preferred stock of Image Technology
Laboratories, Inc.
4.3* Form of Private Placement Warrant
4.4* Form of Investor Warrant
4.5* Form of Oakes Warrant
4.6* Form of Subscription Agreement

10.1* Image Technology Laboratories, Inc. 1998 Stock Option Plan
10.2* Stockholders Agreement dated January 16, 1998 among certain
investors and Image Technology Laboratories, Inc.
10.3* Form of Registration Rights Agreement dated February 2000 among
certain stockholders of Image Technology Laboratories, Inc. and
Image Technology Laboratories, Inc.
10.4* Assignment of Intellectual Property Agreement dated as of
December 18, 1997 between Image Technology Laboratories, Inc. and
David Ryon, M. D., Carlton T. Phelps, M. D. and Lewis M. Edwards.
10.5* Form of Facility Usage and Equipment Lease Agreement by and
between Mid Rockland Imaging and Image Technology Laboratories,
Inc. dated January 12, 1998
10.6* Form of Employment Agreement dated December 21, 1999 between
Image Technology Laboratories, Inc. and David Ryon, M. D.
10.7* Form of Employment Agreement dated December 21, 1999 between
Image Technology Laboratories, Inc. and Carlton T. Phelps, M. D.
10.8* Form of Employment Agreement dated December 21, 1999 between
Image Technology Laboratories, Inc. and Lewis M. Edwards
10.9 Form of Employment Agreement dated May 5, 2004 between
Image Technology Laboratories, Inc. and Barry C. Muradian
13 Code of Ethics
31.1 Certification of Chief Executive Officer required by Rule
13a-14(a)/15d-14(a) under the Exchange Act
32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of
Sarbanes-Oxley Act of 2002

* Filed with amendment no. 1 to registration statement (No.333-336787)
on June 6, 2000.
** Filed with amendment no. 2 to registration statement (No. 333-336787)
on July 27, 2000.

ITEM 14. PRINCIPAL ACCOUNTANTS FEES AND SERVICES

AUDIT FEES

For the fiscal year ended 2004 and 2003, our principal accounting firm, J. H.
Cohn LLP, charged aggregate fees of approximately of $49,000 and $30,000,
respectively, for the audit of our annual financial statements and review of the
financial statements included in our quarterly reports.

AUDIT RELATED FEES

For the fiscal year ended 2004 and 2003, our principal accounting firm, J. H.
Cohn LLP, billed us aggregate fees of approximately $0 and $6,000, respectively,
for work related to audit related reports.

TAX FEES:

For the fiscal year ended 2004 and 2003, our principal accounting firm J.H. Cohn
LLP, billed us aggregate fees of approximately $3,600 and $2,200 for tax
services.

ALL OTHER FEES:

J.H. Cohn LLP did not bill us for any other services in either 2004 or 2003.

S I G N A T U R E S

Pursuant to the requirements of Section 13 or 15(d) 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.

IMAGE TECHNOLOGY LABORATORIES, INC.

BY: /S/ BARRY C. MURADIAN
-----------------------------
BARRY C. MURADIAN,
CHIEF EXECUTIVE OFFICER AND
PRINCIPAL ACCOUNTING OFFICER

DATE: APRIL 28, 2005

Pursuant to the requirements of the securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.

Signature Title Date
----------------------------- ---------------------------- -------------

/S/ LEWIS M. EDWARDS CHAIRMAN, BOARD OF DIRECTORS APRIL 28, 2005
-----------------------------
LEWIS M. EDWARDS

/S/ ROBERT CARPENTER DIRECTOR APRIL 28, 2005
-----------------------------
ROBERT CARPENTER

/S/ JOHN NACCARATO DIRECTOR APRIL 28, 2005
-----------------------------
JOHN NACCARATO

/S/ RICHARD NORRELL DIRECTOR APRIL 28, 2005
-----------------------------
RICHARD NORRELL