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, 2007

IMAGE TECHNOLOGY LABORATORIES, INC.

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

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

602 ENTERPRISE DRIVE, KINGSTON, NEW YORK 12401
---------------------------------------- ----------
(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

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. [ ]

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

The issuer's revenues for the most recent fiscal year were $534,438.

The aggregate market value of the voting stock held by non-affiliates of the
Registrant, based on the $.06 last sales price reported by OTC.BB on April 2,
2008 was $389,592.

As of December 31, 2007, the Registrant had issued, and outstanding, 15,238,778
shares of common stock.

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

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 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."

1. 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. The Company is a systems integrator that provides a total solution of
hardware, software and service to the customer for their product.

The Company was founded and incorporated in the state of Delaware in 1997 by Dr.
David Ryon, Chief Executive Officer and founder of The Kingston Diagnostic
Center; Dr. Carlton Phelps, Chief Financial Officer and former Chief of
Radiology at The Kingston Hospital; and Lewis M. Edwards, Chief Technical
Officer and formerly Senior Technical Staff Member and lead engineer of the 3D
Graphics Lab at IBM. In fiscal year 2000 ITL successfully completed a private
placement (of approximately $2 Million), followed by an SB2 registration and a
self-underwritten public offering raising net proceeds of $1.02 million to
partially fund its development efforts.

The Company is headquartered in Kingston, New York - about 100 miles north of
New York City. The Company's shares of common stock are publicly traded on the
OTC Bulletin Board under the symbol "IMTL". Of the three original co-founders,
only Mr. Edwards remains at the Company. In the first quarter of 2002, Dr.
Phelps departed the Company and resigned from the Board of Directors. Dr. Ryon
passed away suddenly in December of 2004. The Company has secured a roster of
active customers, and is seeking to expand their sales and marketing initiatives
by both organic and acquisitive growth strategies.

ITL's lead product is their "WarpSpeed" software system, which is built on a
unique modular architecture, with high throughput capabilities by a staff of
software engineers experienced in designing and writing enterprise level
programs. The result is a highly reliable, scalable radiology business solution,
which is easily upgraded to meet the demands of a growing customer environment.
These qualities allow ITL to deliver a radiology product specifically tailored
to a customer's requirements. Innovative development work will allow customers
to stay at the forefront of technological advances by allowing easy extensions
and upgrades to existing systems.

-2-

PRODUCTS

WarpSpeed is a "Radiology Information System / Picture Archiving and
Communications System", know as RIS/PACS, for use in the management of patient
information and the processing/storage of medical images by hospitals and
diagnostic imaging centers. The RIS portion of the system inputs and stores
patient demographics, scheduling information, insurance data, and the billing
records required to service patients visit. The RIS system also manages the
analysis reports generated by the radiologist resulting from reviewing the
patient's image data. The PACS portion of the system acquires and stores
diagnostic images in standard DICOM (Digital Imaging and Communications in
Medicine) digital format from imaging equipment (called "modality" in the health
industry) such as Computerized Tomography (CAT scan), Magnetic Resonance Imaging
(MRI), Ultrasound, Nuclear Imaging, Digital Fluoroscopy, Computed Radiography,
Digital Mammography, Digital Radiography, Positron Emission Tomography (PET),
etc, called a "study".

The uniqueness of WarpSpeed is in it being a MONOLITHIC RIS/PACS system made
possible by the development of a single, central source of patient / study data
called a database. Through the single database, the components of the RIS system
and the components of the PACS system can easily share consistent data and
provide a single source of information about a patient anywhere in the study
process. This includes patient exam scheduling, patient demographics, insurance,
imaging, statistics, mammography (BIRADS) reporting, diagnostic reports and
billing records. Everything is available on a single application platform
(WarpSpeed). The unified data also allows the efficient deployment of another
key WarpSpeed component, the Workflow manager. The Workflow manager manages the
process flow from the beginning to the end of a patient study. The Workflow
manager eliminates multiple input of the same patient data into a non integrated
RIS/PACS systems, eliminates the passing of folders between departments, reduces
the number of confirming telephone calls, and removes the need to access
multiple computer applications to access the patient's data and status.

Further, unified data allows for images to be inserted into the radiologist's
report, a radiologist's dictation to be part of the workflow process (and stay
totally within the RIS/PACS system), and intelligent, automatic routing of work
and data to the next individual(s) in the process flow. The WarpSpeed system
also allows the sending of data via integrated e-mail or fax or storing it on a
patient CD without evoking assistance outside the WarpSpeed application. ITL
StudyNotes may be attached to a patient's study by the radiologist, staff
physician or department administrators via an ITL WebViewer, Administrative
Workstation, Modality Workstation or Radiologist Display Workstation, and
subsequently viewed by these system components.

The advantage of a monolithic database system is to improve the overall
performance, reliability and efficiency of the radiology environment while
reducing the operational cost to the hospital/radiology center. The design goal
is also to enable more complex radiology studies and allow the
hospital/radiology center to readily adjust to a fast changing technology world
without the need to reconcile data from disjoint PACS and RIS systems.

The WarpSpeed application package is enterprise level software developed by
knowledgeable and experienced enterprise level software/hardware engineers with
the subject matter expertise of Board-certified radiologists. This should be a
major factor in choosing a RIS/PACS system. The hospital/radiology application
environment needs robust system performance, security, reliability and recovery
capabilities. Engineers experienced in this enterprise environment can only
develop such a system. The WarpSpeed development team has extensive enterprise
level experience with graphics, database systems, operating systems, networking
and application software. They have years of experience in the radiology
environment. They understand performance and the requirements of data
protection, system reliability, and the need for multiple levels of recovery in
the critical places of both the hardware and software. These features are built
into WarpSpeed and it is these same engineers who continue to support, service
and expand the functionality of the product.

-3-

Another design objective of WarpSpeed is scalability. The WarpSpeed system
consists of ITL proprietary application software running on commercially
available computer hardware, operating systems and database. The modular design
of the software allows the customer to have a WarpSpeed solution consisting of
almost any size: from a single computer to a large, fully distributed system
with separate computers handling the database, distributed file system storage,
server components such as the Workflow Manager, Report Distribution Manager,
Schedule Server and Background Transfer Service, and the client components such
as the Radiologist Display Workstation(s), the Modality Workstations(s), the
Stenography Workstation(s) and the Administrative Workstation(s). The
distributed system is tied together with local high speed networking to allow
the timely delivery of imaging and patient information to the radiologist.
Innovative intelligent algorithms have been developed to reduce the network
bandwidth and database storage requirements, which are two of the most
significant cost factors associated with building a PACS/RIS system. Secure,
remote access is available to radiologists and physicians via the internet. The
WarpSpeed system allows for flexibility in configuring a total system, building
the system to meet the hospital/radiology centers current needs while preserving
growth paths.

The ITL WarpSpeed system may be configured with a fully redundant hot-standby
secondary-server, generally located off-site, to enhance reliability and
availability of patient data and images particularly in response to physical
disasters. DICOM files, reports, database and transaction log backups are
replicated to the secondary-server in near-real time, and the database instance
running on the backup-server is kept in synchronization with the primary server
within 15 minute intervals. In the event of a disaster, the secondary-server
will assume a fully functional primary-server role in 30-45 minutes. ITL is not
aware of any other RIS/PACS vendor that provides this capability in our market
space. The ITL WarpSpeed system may also be configured with the DVD-stack ITL
FileArchiver, allowing local or remote multiple DVD archive copies of DICOM
files, reports and databases.

At the heart of the system is a software module referred to as the ITL Workflow
Manager. This software module is an IHE compliant workflow solution, which
allows the entire process of patient scheduling, registration, image
acquisition, image display, and radiographic report generation to be totally
automated in WarpSpeed to a degree that is yet to be demonstrated in the
industry. The 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 sub-specialties. Once the study has
been read and analyzed, the radiologist dictates the report, which, in turn, is
distributed to an available stenographer. After transcription, the report
returns to the reporting radiologist, wherever he/she is logged on, for proof
reading and final signature. The workload manager makes sure that the data is
available to the right person, at the appropriate time and at the desired
location.

Following signoff, the ITL Report Distribution Manager prints, faxes and/or
encrypts / e-mails the final report, maintaining substitutable versions of the
diagnostic reports as .RTF files and generating archive versions as .PDF files
for distribution and web access.

The ITL Schedule Server manages a centralized multi-site, multi-equipment time
slot reservation system that includes a procedure-based scheduling methodology
which allows an imaging facility to codify scheduling rules and hints across
different types of imaging modalities, body parts and a virtually unlimited set
of clinical study types.

The ITL Background Transfer Service (BTS) supports the transfer of DICOM image
files from a remote location containing one or more imaging modalities connected
to a main site via a WAN. The transfers take place in the background using
algorithms that support recovery and restart in the event of network outages and
errors while preserving bandwidth for interactive use at the remote site and
freeing the technologist from waiting for transfer confirmation. Typically, the
DICOM image objects pushed to the Modality Workstation by the imaging modalities
are compressed using JPEG Lossless, JPEG-2000 Lossless or JPEG-LS Lossless
compression prior to transfer by the BTS to the ITL RIS/PACS server site(s)
where they are decompressed for faster access by the Radiologist Display
Workstation, described below. The BTS, upon successful transfer of all of the
images constituting an imaging study, injects the study into the workflow for
assignment by the Workflow Manager.

-4-

Another component of the system is the ITL Radiologist Display Workstation. The
Radiologist Display Workstation permits the simultaneous viewing of multiple
diagnostic images (usually on high resolution displays) together with relevant
patient data displayed on a supporting touch-screen display. The imaging
information can be displayed in either film mode or stacking mode depending on
the imaging modality and radiologists' preferences. In film mode, the
workstation emulates the current film based paradigm that uses traditional X-Ray
view boxes to display multiple images. MRI and CT studies are typically viewed
in stack mode with automatic cross-referencing across images intersecting in 3D
space, as the radiologist scrolls up and down through the stacked series of
images. The control of the Radiologist Display Workstation is via a surface
acoustic wave (SAW) touch-screen workstation so as to not use valuable space on
the high-resolution diagnostic monitors typically configured with the
Workstation, improving the speed and accuracy of diagnostic interpretation.

The Radiologist 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 a virtually unlimited number of diagnostic
images on multiple display surfaces. The software can blend together a number of
monitors, of arbitrary resolution, into one large virtual display, as required
by the radiologist. A radiologist can read and interpret digital images from any
imaging modality on a radiologist display workstation, which can be either
local, or at a remote location when connected via encrypted tunnels (VPNs) over
the Internet. This facilitates time-critical transfer of patient information
between hospital departments, as well as rapid consultations by specialists at
remote locations. The system also affords convenient home viewing by
radiologists using lower-cost, reduced resolution monitor(s). The user-interface
of the ITL Radiologist Display Workstation has been designed by radiologists for
ease of use, offering an un-cluttered touch-panel control screen that does not
intimidate new users while still making more sophisticated operations readily
available.

The ITL Administrative Workstations are PC-based and are normally used for the
RIS functions, such as patient demographic entry and maintenance, online report
viewing, scheduling (both basic and procedure-based), schedule queries, workflow
status monitoring and control, report log viewing, referring physician entry and
maintenance, radiologist preferences management, schedule procedure creation and
editing, study ICD-9 procedure code modifications, generalized RIS queries and
"super-administrator" functions such as patient / study merges.

The ITL Stenography Workstation is also PC-based and provides for automation of
much of the mundane and error-prone inclusion of patient, study and referring
physician demographic information into the report. The Stenography Workstation
application links to and controls Microsoft Word for the production of these
reports, thus offering the stenographer a comfortable and familiar
word-processing environment.

The ITL Modality Workstation is the WarpSpeed software component which is used
to create, store, reproduce and transmit digitized images generated by
DICOM-compatible diagnostic imaging equipment, including digital radiography,
computed radiography, ultrasound, nuclear medicine, digital fluoroscopy,
computed tomography, magnetic resonance imaging and digital mammography. The
Modality Workstation is normally connected to the diagnostic imaging equipment
via a high-speed local area connection. By acting as the DICOM gateway to the
ITL WarpSpeed RIS/PACS system, the Modality Workstation enforces the requisite
quality control to ensure that incoming studies are properly associated with the
correct patient in the RIS, and that the incoming studies are ICD-9 coded by the
individuals most closely associated with the actual performance of the study,
namely the technologists operating the imaging modality. The Modality
Workstation is capable of compressing / decompressing the DICOM images presented
to it by the imaging modality using JPEG Lossless, JPEG-2000 Lossless or JPEG-LS
Lossless compression.

-5-

ITL has leveraged the most recent advances in operating system design, software
development, and networking tools in WarpSpeed to produce a product, which
offers greater functional capability at lower costs through scalable system
architecture. Microsoft Windows 2003 is employed on the WarpSpeed servers for
its management, networking, distributed file system and message queuing, while
Microsoft SQL Server provides the database infrastructure. Microsoft Windows XP
is used for the Modality Workstation, Stenography Workstation and Administrative
Workstation. It is the truly modular and scalable architecture, which permits
function to be distributed incrementally across the hardware and give the
customer tremendous freedom in designing their current and future system
environment.

ITL has developed sophisticated software sub-systems to monitor and update the
WarpSpeed system. These sub-systems allow the WarpSpeed system to be deployed in
diagnostic imaging centers and small to mid-sized hospitals where typically
local IT staff may not be available to monitor and administer the system, thus
offering a potential savings personnel cost.

ITL has also developed an extensive set of internal data migration tools that
enable us to quickly and efficiently import a customer's existing RIS data into
the WarpSpeed system, such as patient demographics, study history, schedules and
referring physician lists. Standard DICOM files can also be imported and
correlated with imported RIS data.

ITL began shipment of its WarpSpeed Web Portal, comprised of the ITL WebServer
and ITL WebViewer in the second quarter of 2006, allowing referring clinicians
secure access to images and reports using standard PCs running Microsoft Windows
2000 and XP using Microsoft's .NET technology. The ITL WebViewer is fully
integrated into the WarpSpeed workflow, allowing a radiologist to logon to one
or more sites, view study images and reports, edit or sign reports and add or
review ITL StudyNotes.

In summary, the WarpSpeed system provides a total, turn-key monolithic solution
to the administrative (RIS) and imaging (PACS) aspects of radiology services
that does not force local IT to manage the integration, support and data
inconsistency issues of separate RIS and PACS products joined together by our
competitors. WarpSpeed has the capability to automate a hospital's radiology
department or be the primary patient and image management system for any
radiology diagnostic imaging center. In a hospital environment, WarpSpeed has
been designed to interface with hospital information systems so that a patient's
clinical data can be integrated with diagnostics images for increased accuracy
of image interpretation and diagnosis. ITL's WarpSpeed system offers
performance, enterprise level robustness, reliability and recovery, workflow
management, and scalability. Our value to our customers include consistent and
organized radiology process flow control, a completely electronic (vs. paper)
solution, supporting a more accurate and reliable diagnosis by the radiologists
with less opportunity for error, lower operating costs, overall better patient
care. The accuracy of information maintained within the ITL WarpSpeed monolithic
RIS/PACS system, along with the organized workflow, allows for more accurate
billing and the potential for an improvement in the reimbursement rate by the
imaging facility.

MARKETING

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, the generally accepted metric defining a medium-sized
hospital.

According to 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. Millennium Research Group reports that the U.S. market for
PACS grew by over 25% in 2004 and, by 2009, will generate nearly $3.0 billion in
revenue. Global Industry Analysts, another market research firm, is predicting
that the global market for PACS and teleradiology systems will reach $4.4
billion by 2010.

PACS technology, while widely appreciated, has yet to be widely adopted in the
medium to smaller (community) hospitals and single / multi-site imaging centers,
offering an excellent opportunity for ITL and WarpSpeed. We believe that the
lack of penetration of RIS/PAC systems into this market segment is a reflection
of the limitation of current solutions to deliver expected value; the high
purchase cost of solutions by the major vendors and the required IT staff and
expertise. According to Frost & Sullivan, approximately 17.7% of hospitals in
North America had PACS in 2003.

-6-

ITL markets a fourth generation medical information and image management system
that we believe is more flexible, usable and scalable than any currently
available product. The Company markets ITL's WarpSpeed system through an
in-house marketing presence and a contract 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 offers systems with superior
price/performance characteristics without requiring the overhead of local IT
staff at the imaging facility.

ITL also expects a major sub-segment of the market over the next several years
will be PACS upgrades and migrations as early adopters begin to recognize the
deficiencies of the earlier generation of products. This emerging opportunity
will allow ITL to leverage its investment in migration tools and technologies to
capture these customers.

The penetration of Computed Radiography (CR) imaging equipment into specialized
clinics, such as orthopedic practices, presents an excellent opportunity for ITL
to take advantage of its modular software architecture and package the WarpSpeed
system into a family of offerings to such practices. Such a family will allow a
lower cost of entry yet provide a growth path in terms of capacity and reach
that should prove quite attractive in this space.

ITL believes that 3D viewing capability is rapidly becoming an important factor
in our diagnostic imaging market comprised of single / multi-site imaging
centers and small (community) to medium hospitals, offering an improvement in
certain diagnosis and a potentially higher reimbursement to the imaging
facility. We expect that ITL's expertise in 3D imaging will allow us to
vigorously pursue this emerging market segment.

With the aging baby boomers starting to place more of a burden on the health
care system in the U.S. , ITL expects the diagnostic imaging market to grow to
meet this demand. The increased awareness of the importance of Electronic
Medical Records (EMR) as a means of controlling medical costs while improving
patient care will, no doubt, impact the RIS/PACS market as the images and
reports produced from RIS/PACS are an important component in EMR. ITL intends to
pursue EMR within the RIS/PACS space and possibly beyond as other opportunities
become evident to deploy our technology and expertise in medical information
systems. In May 2007, ITL announced its participation in the Southern Tier
Health Link Web Portal in association with Park Avenue Radiology. This Web
Portal is part of the New York State Health Care Efficiency and Affordability
Law for New Yorkers Capital Grant Program, often referred to as the HEAL NY
Program. HEAL NY includes identification and support for development and
investment in Health Information Technology initiatives at the regional level.
HTTP://WWW.HEALTH.STATE.NY.US/TECHNOLOGY

ITL is selling WarpSpeed with two (2) pricing models: The first is an outright
capital purchase and the second is a fee per-study-performed basis. The latter
plan is an attractive approach for our clients, as there is no capital outlay,
the cost is expensed, and the model does not penalize radiologists and clinical
staff for multiple consultative reviews of the image data.

COMPETITION AND COMPETITIVE ADVANTAGE

ITL is unique among the 50+ companies in the U.S. that are marketing or
developing RIS or PACS or RIS/PACS solutions for the radiology community. The
Company believes that it is the only company that has implemented a single
monolithic 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,
Philips Medical Systems 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.

-7-

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 and flexible. These features alone set ITL apart from all competition.

We believe that our ability to configure a cost-effective secondary-server as
part of the ITL WarpSpeed system offers our customers a disaster resilient
system that we believe is not currently offered by any of our competitors in our
market space. The ITL WarpSpeed system may be configured with a fully redundant
hot-standby secondary-server, generally located off-site, to enhance reliability
and availability of patient data and images particularly in response to physical
disasters. DICOM files, reports, database and transaction log backups are
replicated to the secondary-server in near-real time, and the database instance
running on the backup-server is kept in synchronization with the primary server
within 15 minute intervals. In the event of a disaster, the secondary-server
will assume a fully functional primary-server role in 30-45 minutes.

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 by the FDA.

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. Lewis M. Edwards, ITL's
Chief Technical Officer, 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.

-8-

MATERIAL CONTRACTS

In May 2003, ITL signed a multi-year contract with Park Avenue Associates in
Radiology PC., Binghamton NY, for the installation of its 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. ITL expanded it's installation to an off-campus Women's Center in
May 2005, for digital mammography and ultrasound, and again in November 2005 at
the hospital with the installation of Computed Radiography (CR) modalities as
St. Anthony Community Hospital became essentially film-less. Our installation at
St. Anthony Community Hospital also includes an ITL Backup Server, a
fully-redundant hot-standby server.

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 spread across
three sites, 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.

In April 2007 ITL and Park Ave Radiology amended their contract for the purchase
and installation of the ITL WebServer and WebViewer technologies.

In June 2007 , ITL closed a contract with Bon Secours Community Hospital in Port
Jervis, NY. Bon Secours Community Hospital is a member of Bon Secours Charity
Health System, which owns and operates 32 health care facilities. Our
installation at Bon Secours Community Hospital also includes an ITL Backup
Server, a fully-redundant hot-standby server.

In September 2007 ITL and St. Anthony Community Hospital amended their contract
for the installation of the ITL WebServer and WebViewer technologies.

In December 2007, Park Ave Radiology purchased an ITL Primary Server upgrade
along with an ITL Backup Server.

In February 2004, the Company borrowed $125,000 from Valley Commercial Capital,
LLC ("Valley"). This loan was evidenced by a promissory note and provided for
interest at 8% per annum. In March 2004, the Company borrowed an additional
$138,997 from Valley, also evidenced by a promissory note, which provided for
interest at 8% per annum. The remaining balance of these loans was repaid in
August 2006 as described below.

In December 2005, the Estate of Dr. Ryon loaned the Company an additional
$36,000 under an amendment to the December 2004 promissory note. Additional
amounts were loaned to the Company in March 2006 for $22,500, in August 2006 for
$57,672 and in September 2006 for $153,375. These amounts, along with other
previous loans to the Company by the largest stockholder totaling $374,548 were
converted into 1,000 shares of Cumulative Convertible Preferred Series B stock
in late September 2006, and all accrued interest was forgiven. Cumulative
Convertible Preferred Stock Series B can be converted to common stock of Image
Technology Laboratories at a ratio of one share of Cumulative Convertible
Preferred Stock Series B to 2,700 shares of common stock. Either the stockholder
or the Company may elect to force conversion after two years in units of 100
shares of Cumulative Convertible Preferred Stock Series B. The Company may also
elect to repurchase the Cumulative Convertible Preferred Stock Series B in units
of 100 shares of Cumulative Convertible Preferred Stock Series B at any time for
$432 per share of Cumulative Convertible Preferred Stock Series B. Fixed
dividends on the stock accumulate as 12.5 additional shares of Cumulative
Convertible Preferred Stock Series B per quarter. The underlying common stock,
should the Company or shareholder elect to convert, is unregistered. The voting
rights are set at one vote per share of Cumulative Convertible Preferred Stock
Series B.

-9-

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 Dr.
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. In December 2005, the Estate of Dr. Ryon loaned the Company an
additional $36,000 under an amendment to the December 2004 promissory note and
the payment schedule was renegotiated to begin in January 2007. Additional
amounts were loaned to the Company in March 2006 for $22,500, in August 2006 for
$57,672 and in September 2006 for $153,375.26. These amounts, along with other
previous loans to the Company by the largest stockholder totaling $374,548 were
converted to 1000 shares of Cumulative Convertible Preferred Series B stock in
late September 2006, and all accrued interest was forgiven.

In September 2005, the Company borrowed $50,000 from a member of the Company's
Board of Directors as part of a Bridge Loan Agreement that included the issuance
of warrants to purchase 50,000 shares of Common Stock of the Company. The
five-year warrants have an exercise price of $0.33 per share. The Bridge Loan
had an annual interest rate of 14%. The principal of $50,000 was repaid in July
2007; $5,000 of the accrued interest was paid in September 2007 and a final
accrued interest payment of $5,000 was made in March 2008.

In March 2006, the Company executed an amendment to its contract with Park
Avenue Associates in Radiology PC, Binghamton NY to extend the term of the
original RIS/PACS contract through December 31, 2008.

Also in March 2006, largest stockholder loaned the Company an additional $22,500
under an amendment to the December 2004 promissory note.

In late August 2006 our largest stockholder loaned the Company $57,672, under an
amendment to the December 2004 promissory note, to payoff the remaining balance
of the Valley loans.

In September 2006, the Company's largest stockholder loaned the Company
$153,375, the proceeds of which were used to satisfy the settlement with Dr.
Phelps. This amount, along with other previous loans to the Company by the
largest stockholder totaling $374,548 was converted to 1,000 shares of
Cumulative Convertible Preferred Series B stock in late September 2006, and all
accrued interest was forgiven.

In May 2007, our largest shareholder provided $3,684 to the Company as an
interest-free loan in order to retain RIS/PACS market consultants. There are no
repayment terms to this loan.

In June 2007, the Company entered into a five-year Accounts Receivable loan
agreement with PowerLease Solutions, LLC and NetBank to borrow $650,000 at a
9.5% annual interest rate. Monthly payments are $13,651 and the loan is
co-signed by the Company's principal stockholder. As of December 31, 2007, there
was $597,947 outstanding under this agreement. Fixed fees paid to PowerLease
were $10,402.

-10-

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.

In September 2002, we executed a five-year lease (at approximately $900 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. In December 2007, we executed a five-year lease (at approximately $3000
per month) for larger office space at TechCity. The Company believes that its
current facilities will meet its needs for the foreseeable future, including any
anticipated growth in marketing / sales, R&D and systems integration / test.

ITEM 3. 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 15th, 2004, the Arbitrator awarded
attorneys' fees and arbitration expenses totaling $120,810 and $9,250,
respectively to Dr. Phelps. A total of $130,060 was added to the expenses in the
Company's 2004 and 2005 Statement of Operations and the liabilities have been
increased by the same amount in the Company's Balance Sheets of December 31,
2004 and December 31, 2005.

With respect to the Company's arbitration with Dr. Carlton Phelps (which was
discussed in detail in the Company's Annual Report on Form 10-KSB for the year
ended December 31, 2004), Dr. Phelps commenced a proceeding in New York State
Supreme Court, Albany County, to confirm the arbitrator's award. The Company had
opposed confirmation and, in the alternative, sought a modification of the
award. By decision and judgment dated June 4, 2006, Justice Teresi of the
Supreme Court, Albany County confirmed the award of the arbitrator issued on
September 4, 2004, and denied the Company's motion to vacate or modify that
award with respect to the award of attorneys' fees and expenses to Dr. Phelps. A
detailed discussion of the arbitration award was included in our Annual Report
on Form 10-KSB for the fiscal year ended December 31, 2005.

In September 2006, the Company entered into a Settlement Agreement with Dr.
Phelps whereby the Company paid Dr. Phelps a total of $153,375, consisting of
attorneys' fees awarded by the arbitrator and confirmed by the court plus
interest calculated at a rate of nine percent per annum from September 4, 2004
until September 1, 2006. Additionally, as part of the Settlement Agreement, Dr.
Phelps resold 2,309,583 shares of common stock of Image Technology Laboratories
to the Company at $0.10 per share. An 8-K was filed with the Securities and
Exchange Commission on October 4, 2006 detailing this event.

On January 17, 2006, Barry C. Muradian informed the Company of his resignation
as President, Chief Executive Officer and Principal Accounting Officer,
effective January 20, 2006. An 8-K was filed with the Securities and Exchange
Commission on January 20, 2006. In May 2006, the Company and Mr. Muradian signed
a "Confidential Separation Agreement, Waiver and General Release". As part of
this agreement, Mr. Muradian was paid a total of approximately $22,500, which
represented all guaranteed payments due and owing to Mr. Muradian for salary and
expenses.

-11-

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, 2007.

PART II

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 2006-2007:

-----------------------------------------------------------
2006 2007
---------------------------- ---------------------------
HIGH LOW HIGH LOW

1st Qtr. $ 0.35 $ 0.12 $ 0.23 $ 0.16

2nd Qtr 0.14 0.10 0.20 0.11

3rd Qtr. 0.13 0.08 0.18 0.11

4th Qtr. 0.45 0.10 0.12 0.06

As of April 4, 2007, the number of holders of record of Common Stock was 170.

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 2006, the Registrant issued and sold the securities listed below in
transactions exempt from registration pursuant to Section 4 (2) of the
Securities Act of 1933, as amended. No securities were sold in 2007.

In September of 2006, the Company sold 2,309,583 shares of common stock at a
price of $0.10 to a group of seven accredited investors in a private placement
under Section 4(2) of the Securities Act of 1933, as amended, and Rule 506 of
Regulation D thereunder. These unregistered shares of common stock were issued
with registration rights. The proceeds of this sale of common stock were used to
repurchase 2,309,583 shares of common stock at a price of $0.10 from Dr. Carlton
Phelps, our former vice president of finance, chief financial officer, secretary
and treasurer. The 2,309,583 shares of stock repurchased from Dr. Phelps by the
Company were cancelled upon their tender. An 8-K was filed with the Securities
and Exchange Commission on October 4, 2006. The net effect of the repurchase and
subsequent cancellation of 2,309,583 shares of common stock as described above
in combination with the sale of 2,309,583 shares of common stock as described
above resulted in no change to the number of shares of common stock outstanding
due to this transaction.

-12-

The Company converted a total of $374,548 of debt owed to our largest
shareholder into 1,000 shares of Image Technology Laboratories Convertible
Preferred Stock Series B issued to same shareholder in late September 2006.
Convertible Preferred Stock Series B can be converted to common stock of Image
Technology Laboratories at a ratio of one share of Convertible Preferred Stock
Series B to 2,700 shares of common stock. Either the shareholder or the Company
may elect to force conversion after two years in units of 100 shares of
Convertible Preferred Stock Series B. The Company may also elect to repurchase
the Convertible Preferred Stock Series B in units of 100 shares of Convertible
Preferred Stock Series B at any time for $432 per share of Convertible Preferred
Stock Series B. Dividends accumulate as 12.5 additional shares of Convertible
Preferred Stock Series B per quarter. The underlying common stock, should the
Company or shareholder elect to convert, is unregistered. The voting rights are
set at one vote per share of Convertible Preferred Stock Series B.

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.

At December 31, 2007, 1,050 shares of Preferred Stock Series B are outstanding.
Such shares may be converted at the option of the holder or the Company to
2,835,000 shares of Common stock. Prior to conversion, such shares may be
redeemed by the Company at $432 per share or $453,600 at any time until forced
coversion by either party into Common stock.

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. We
continue to refine and enhance the capabilities of our WarpSpeed system.

For the twelve months ending December 31, 2007, we had a net loss $272,164, and
have had recurring losses and negative cash flows from our operating activities
since inception. On December 31 2007, we had a cash position of $295,495 and
$45,833 in working capital.

As a result of our limited capital resources our independent registered public
accounting firm has indicated in their report on our financial statements for
the year ended December 31, 2007 that there is a substantial doubt about our
ability to continue as a going concern. We believe, however, that as a result of

-13-

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, 2008. 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 structures 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 as we have done in 2007.
Included in such resources are 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 is there 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.

-14-

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 $1,120,000. 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, 2007. 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.

-15-

RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2007 COMPARED TO THE YEAR
ENDED DECEMBER 31, 2006

REVENUE:

During the year ended December 31, 2007, our total revenues decreased $138,168,
or 20.5% to $534,438 from $672,606 in the prior year. This is largely
attributable to a reduction in WarpSpeed system purchase revenue in 2007, and
not offset by the revenue stream from an additional ASP useage-fee WarpSpeed
system placed into service in December 2007. We also deferred $25,000 in revenue
associated with the sale of a system upgrade in late December 2007 which was
installed in January 2008.

REVENUE DISCUSSION:

ITL is reporting fiscal year revenues, ending December 31, 2007, of $534,438.
These revenues include sales of equipment upgrades at two of our customers and
the purchase of an ITL Backup. They do not include a significant contribution
from the ASP usage fees at a new installation which became fully operational in
early December 2007. Our revenues were derived solely from the Companies normal
line-of-work: developing, selling and servicing medical image and information
management systems. During the fiscal year ended December 31, 2006, ITL reported
total revenue of $672,606.

The Company expects that WarpSpeed system installations will take place in 2008
as a result of our continued investments in research and development, and
additional focus on marketing. 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:

The cost of revenue in 2007 of $19,323 represents equipment costs of upgrades
sold in 2007 along with depreciated costs of goods sold associated with our ASP
installations. The cost of revenue in 2006 was $3,105.

RESEARCH AND DEVELOPMENT EXPENSES:

During the year ended December 31, 2007, we incurred research and development
expenses of $373,670 as compared with $381,314 in the preceding year. These
expenses are consistent with ITL's efforts to enhance the WarpSpeed system while
controlling costs and are primarily compensation to our Chief Technology Officer
and engineering personnel.

SALES AND MARKETING EXPENSES:

During the years ended December 31, 2007 and 2006, we incurred sales and
marketing expenses of $15,149 and $17,485, respectively; a decrease of $2,338.
The reduction in this category of expenses was largely associated with the
departure of Mr. Muradian in January 2006. The Company has focused its efforts
on continuing to control costs while identifying appropriate sales personnel and
resources. These expenses are expected to increase in 2008 consistent with
achieving our revenue goals.

GENERAL AND ADMINISTRATIVE EXPENSES:

During the year ended December 31, 2007, we incurred general and administrative
expenses of $300,530 as compared to $316,479 in the prior year, a decrease of
$15,949. General and Administrative Expenses are attributable to compensation,
travel, customer support and infrastructure-related costs. The Company is
continuing to work diligently to control costs while focusing on revenue
generating activities.

-16-

NET LOSS:

During fiscal year ended December 31, 2007, we incurred a loss of $272,164 ($.02
per share), as compared to a loss of $143,707 ($.01 per share) for the year
ended December 31, 2006. The Company is aggressively managing costs while
focusing on increasing revenues from sales of our systems and software and ASP
fees.

LIQUIDITY AND CAPITAL RESOURCES:

As of December 31, 2007, we had cash and cash equivalents of $295,495 and
$45,833 in working capital as compared with a cash position of $3,264 and a
working capital deficiency of $247,315 in 2006. In comparing FY 2007 with 2006,
cash and cash equivalents increased by $292,232 to $295,495; accounts receivable
decreased by $23,347 to $171,492 and total current assets increased by $266,918
to $475,623.

During 2007, our operating activities utilized $186,269 of cash. This arose
primarily from our net loss of $272,164 as adjusted for a non-cash depreciation
addition of $79,702, a non-cash addition of SFAS 123(R) stock based compensation
of $97,930, an decrease in accounts receivables of $23,347 (taking away from
cash), a decrease in accounts payable and accrued expenses of $45,469 (taking
away from cash) and an increase in deferred revenue of $25,000 associated with
the sale of a system upgrade in late December 2007 which was installed in
January 2008. In comparison, during 2006, our operating activities utilized
$156,688 of cash. This arose primarily from our net loss of $143,707 as adjusted
for a non-cash depreciation addition of $56,816, a non-cash addition of SFAS
123(R) stock based compensation of $97,930, an increase in accounts receivables
of $82,638 (taking away from cash), and a decrease in accounts payable and
accrued expenses of $81,947 (taking away from cash)

During 2007 our investing activities used $79,702 of cash, primarily to purchase
equipment placed in service to generate revenue. During 2006, $3,826 was used
for the same purpose.

The above net uses of cash in 2007 were partially offset by our financing
activities which totaled $558,203. This cash was generated by the proceeds from
loans from stockholders and Net Bank which netted $601,631 along with $6,572
from our bank line of credit, and reduced by the repayment of notes and long
term debt of $50,000. In 2006, the net uses of cash were partially offset by our
financing activities which totaled $123,080. This cash was generated by the
proceeds from loans from stockholders which netted $230,148 along with $7,545
from our bank line of credit, and reduced by the repayment of notes and long
term debt of $114,613.

In September 2002, we applied for, and received, a line of credit from M & T
Bank, renewable annually, in the amount of $75,000. On December 31, 2007, the
outstanding balance was $73,467.

In February and March 2004, we borrowed an aggregate of $264,000 from Valley
Commercial Capital, LLC ("Valley"). These loans required aggregate monthly
payments of principal and interest of $8,273 through February 2007 and $4,682 in
March 2007. In late August 2006, the remaining balance of these loans, $57,672,
was paid. This payoff was funded by a loan from our largest stockholder and was
converted to Cumulative Convertible Preferred Series B stock issued to our
largest stockholder in late September 2006.

In December 2004, we borrowed $105,000 from our former Chief Executive Officer,
which was to be repaid over 24 months, beginning in January 2007. This amount
was converted to Cumulative Convertible Preferred Series B stock issued to our
largest stockholder in late September 2006.

-17-

In December 2005, our largest stockholder loaned the Company an additional
$36,000 under an amendment to the December 2004 promissory note. An additional
$22,500 was borrowed from our largest stockholder in March 2006. These amounts
were converted to Cumulative Convertible Preferred Series B stock issued to our
largest stockholder in late September 2006.

In September 2006, the Company entered into a settlement agreement with Dr.
Carlton Phelps, our former vice president of finance and administration, chief
financial officer, secretary and treasurer. Pursuant to the Settlement
Agreement, the Company paid Dr. Phelps a total of $153,375.26 consisting of
attorneys' fees awarded by the arbitrator and confirmed by the court plus
interest calculated at a rate of nine percent per annum from September 4, 2004
until September 1, 2006. The Company filed an 8-K detailing this event with the
Securities and Exchange Commission on October 4, 2006. In September 2006, the
Company's largest stockholder loaned the Company $153,375.26, the proceeds of
which were used to satisfy the $153,375.26 settlement with Dr. Phelps. This
amount was converted to Cumulative Convertible Preferred Series B stock issued
to our largest stockholder in late September 2006.

In May 2007, our largest shareholder provided $3,684 to the Company as an
interest-free loan in order to retain RIS/PACS market consultants. There are no
repayment terms to this loan.

We require cash to fund our working capital needs and capital expenditures, as
well as to meet existing commitments. Such commitments include payments of
existing loans including our line of credit, and $3,000 per month pursuant to a
five-year lease commitment ending in December 2012 for our operations center in
Kingston, New York. At times, in order to help in maximizing our working
capital, our directors, officers and employees have contributed to capital or
deferred compensation due under their agreements. It is anticipated, but not
assured, that, should the need arise; such contributions or deferrals might be
available to us in the future. Additionally, we are considering outside sources
of equity funds and other types of financing in order to help support our
anticipated growth. There can be no assurance that such efforts will be
successful.

Management believes that as a result of the proceeds from financing activities,
as well as anticipated cash flow generated by sales of its RIS/PACS solution (in
addition to the current cash flow resulting from our installed ASP base), the
Company will be able to continue to meet its obligations as they become due
through at least December 31, 2008. 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 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.

-18-

ITEM 7. FINANCIAL STATEMENTS

Financial Statements

INDEX TO FINANCIAL STATEMENTS

Page

Reports of Independent Registered Public Accounting Firms 20-21

Balance Sheet
December 31, 2007 22

Statements of Operations
Years Ended December 31, 2007 and 2006 23

Statements of Changes in Stockholders' Deficiency
Years Ended December 31, 2007 and 2006 24

Statements of Cash Flows
Years Ended December 31, 2007 and 2006 25

Notes to Financial Statements 26-37

-19-

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

We have audited the accompanying balance sheet of Image Technology Laboratories,
Inc. (the "Company") as of December 31, 2007, and the related statements of
operations, stockholders' deficiency, and cash flows for the year then ended.
The Company's management is responsible for these financial statements. Our
responsibility is to express an opinion on these financial statements based on
our audit. The financial statements of the Company as of December 31, 2006, were
audited by other auditors whose report dated April 13, 2007, expressed an
unqualified opinion on those statements.

We conducted our audit 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. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the 2007 financial statements referred to above present fairly,
in all material respects, the financial position of Image Technology
Laboratories, Inc. as of December 31, 2007, and the results of its operations
and its cash flows for the year then ended in conformity with accounting
principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Notes 1 and 2 to the
financial statements, the Company's significant operating losses and
stockholders' deficiency raise substantial doubt about its ability to continue
as a going concern. Management's plans regarding those matters also are
described in Note 1. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.

/s/ UHY LLP
-----------

April 15, 2008
Albany, NY

-20-

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

We have audited the accompanying statements of operations, changes in
stockholders' deficiency and cash flows for the year ended December 31, 2006.
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 audit.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations and cash flows for the year
ended December 31, 2006, 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, 2006.
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 do not include any adjustments
that might result from the outcome of this uncertainty.

/S/ BERENSON LLP
----------------

NEW YORK, NEW YORK
APRIL 13, 2007

-21-

IMAGE TECHNOLOGY LABORATORIES, INC.

BALANCE SHEET
DECEMBER 31, 2007

ASSETS

CURRENT ASSETS:

Cash and cash equivalents $ 295,495
Accounts receivable 171,492
Prepaid expenses and other current assets 8,637
-----------

TOTAL CURRENT ASSETS 475,624

Equipment and improvements, net 136,217
Rent - Deposit 6,000
-----------

$ 617,841
===========

LIABILITIES AND STOCKHOLDERS' DEFICIENCY

CURRENT LIABILITIES:

Loan, Bank line of credit $ 73,467
Current portion of long-term debt 111,794
Accounts payable and accrued expenses 171,933
Deferred revenue 25,000
Accrued compensation payable to stockholders 47,596
-----------

TOTAL CURRENT LIABILITIES 429,790

LONG-TERM LIABILITIES
Long-tem debt, less current portion 486,153
Notes payable to stockholders 3,684
-----------
TOTAL LIABILITIES 919,627

COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIENCY
Preferred stock, par value $.01 per share;
5,000,000 shares authorized;
1,500,000 shares issued and outstanding,
Series A 15,000
1,050 shares issued and outstanding,
Cumulative Convertible Series B 10
Common stock, par value $.01 per share;
50,000,000 shares authorized;

15,238,778 shares issued and outstanding 152,388
Additional paid-in capital 3,727,945
Accumulated deficit (4,197,129)
-----------

TOTAL STOCKHOLDERS' DEFICIENCY (301,786)
-----------

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 617,841
===========

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.

-22-

IMAGE TECHNOLOGY LABORATORIES, INC.

STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2007 AND 2006

2007 2006
------------ ------------

REVENUE:

Systems/ software: license and sales $ 524,950 $ 655,106
Service and other income 9,488 17,500
------------ ------------

TOTAL REVENUE 534,438 672,606

COST OF REVENUE 19,323 3,105
------------ ------------

GROSS PROFIT 515,115 669,501
------------ ------------

EXPENSES:
Research and development 373,670 381,314
Sales and marketing 15,149 17,485
General and administrative
(includes interest expense of $36,345
for 2007 and $29,640 for 2006) 300,530 316,479
Stock Option Compensation 97,930 97,930
------------ ------------

TOTAL COST AND EXPENSES 787,279 813,208
------------ ------------

NET LOSS $ (272,164) $ (143,707)
============ ============

NET LOSS PER COMMON SHARE:
Basic and diluted $ (0.02) $ (0.01)
============ ============

WEIGHTED AVERAGE NUMBER OF SHARES USED IN COMPUTATION:
Basic and diluted 16,738,778 16,739,030
============ ============

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.

-23-

IMAGE TECHNOLOGY LABORATORIES, INC.

STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY
YEARS ENDED DECEMBER 31, 2007 AND 2006

PREFERRED STOCK SERIES
A & B COMMON STOCK
TOTAL
NUMBER NUMBER ADDITIONAL STOCK-
OF OF PAID-IN ACCUMULATED HOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT DEFICIENCY
----------- ----------- ----------- ----------- ----------- ----------- -----------

Balance
January 1, 2006 1,500,000 $ 15,000 15,238,778 $ 152,388 $ 3,157,547 $(3,781,258) $ (456,323)

Amortization of stock
option compensation 97,930 97,930

Issuance of common stock
in private placement 2,309,583 23,095 207,863 230,958
Redemption & Cancellation
of Common Stock (2,309,583) (23,095) (207,863) (230,958)

Preferred Stock
Series B 1,000 10 374,538 374,548

Net loss (143,707) (143,707)
----------- ----------- ----------- ----------- ----------- ----------- -----------

Balance,
December 31, 2006 1,501,000 $ 15,010 15,238,778 $ 152,388 $ 3,630,015 $(3,924,965) $ (127,552)
=========== =========== =========== =========== =========== =========== ===========

Balance
January 1, 2007 1,501,000 $ 15,010 15,238,778 $ 152,388 $ 3,630,015 $(3,924,965) $ (127,552)

Amortization of stock
option compensation 97,930 97,930

Dividends on Preferred
Series B 50 0 0 0

Net loss (272,164) (272,164)
----------- ----------- ----------- ----------- ----------- ----------- -----------

Balance,
December 31, 2007 1,501,050 $ 15,010 15,238,778 $ 152,388 $ 3,727,944 $(4,197,129) $ (301,786)
=========== =========== =========== =========== =========== =========== ===========

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.

-24-

IMAGE TECHNOLOGY LABORATORIES, INC.

STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2007 AND 2006

2007 2006
--------- ---------
OPERATING ACTIVITIES:

Net loss $(272,164) $(143,707)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization of equipment
and improvements 61,751 56,816
Stock Based Compensation 97,930 97,930
Changes in operating assets and liabilities:
Accounts receivable 23,347 (82,638)
Prepaid expenses and other assets (2,537) (3,142)
Accounts payable and accrued expenses (45,469) (123,187)
Deferred revenue 25,000
Accrued compensation payable to stockholders (74,127) 41,240
--------- ---------

NET CASH USED IN OPERATING ACTIVITIES (186,269) (156,688)
--------- ---------

INVESTING ACTIVITIES - PURCHASE OF EQUIPMENT AND IMPROVEMENTS (79,702) (3,826)
--------- ---------

FINANCING ACTIVITIES:
Proceeds from bank line of credit 6,571 7,545
Proceeds from Bank Loan 597,947
Proceeds from private placement of common stock 0 230,958
Redemption of common stock 0 (230,958)
Proceeds from loans from stockholders 3,684 230,148
Repayments of loans from stockholders (50,000)
Repayments of notes payable and long term debt 0 (114,613)

--------- ---------

NET CASH PROVIDED BY FINANCING ACTIVITIES 558,202 123,080
--------- ---------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 292,231 (37,434)

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 3,264 40,698
--------- ---------

CASH, END OF YEAR $ 295,495 $ 3,264
========= =========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 36,345 $ 33,877
========= =========

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Conversion of notes payable to
Cumulative Convertible Preferred Series B stock $ 0 $ 374,548
========= =========

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.

-25-

IMAGE TECHNOLOGY LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED
DECEMBER 31, 2007 AND 2006

NOTE 1 - BUSINESS:
Image Technology Laboratories, Inc. (the "Company") was incorporated on December
5, 1997 and commenced operations on January 1, 1998. The Company develops
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 obtained its first contract for the sale of its WarpSpeed system and
maintenance services in August 2002. The Company is no longer in the development
stage, 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 $295,495, $45,833 in
working capital and a stockholders' deficiency of $301,786 as of December 31,
2007. Management expects a reduction in the level of such losses as we increase
the sales of our products. At times, in order to help in maximizing our working
capital, our directors, officers and employees have contributed to capital or
deferred compensation due under their agreements. It is anticipated, but not
assured, that should the need arise, such contributions or deferrals might be
available to us in the future.

Management believes that as a result of the proceeds from its recent financing
activities, as well as anticipated cash flow generated by sales of or fees from
its RIS/PACS solution, the Company should be able to continue to meet its
obligations as they become due through at least December 31, 2008. Management
also believes that if needed, the Company should 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.

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.

-26-

IMAGE TECHNOLOGY LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED
DECEMBER 31, 2007 AND 2006

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, 2007, the Company has no
cash equivalents.

REVENUE RECOGNITION:
Revenue from the sale 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 is included in deferred revenue in the balance sheet.

CONCENTRATIONS OF CREDIT RISK:
The Company derived substantially all of its revenues in both 2007 and 2006 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, 2007.

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.

ACCOUNTS RECEIVABLE:
Accounts receivable are stated at the amount management expects to collect from
the outstanding balances. Management provides for probable uncollectible amounts
through a charge to earnings and a credit to a valuation allowance based upon
its assessment of the current collection status of individual accounts.
Delinquent amounts that are outstanding after management has conducted
reasonable collection efforts are written off through a charge to the valuation
allowance and a credit to accounts receivable. Based on management's review,
there is no need for an allowance for doubtful accounts at either December 31,
2007 or 2006.

-27-

IMAGE TECHNOLOGY LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED
DECEMBER 31, 2007 AND 2006

RESEARCH AND DEVELOPMENT COSTS:
Research and development costs are charged to expense as incurred.

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. No impairments were recognized
in 2007 or 2006.

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
Series A and common stockholders are substantially equivalent. The Company has
included the 1,500,000 preferred shares Series A outstanding in the weighted
average number of common shares outstanding in the computation of basic loss per
share for the years ended December 31, 2007 and 2006 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 2007 and 2006, the assumed effects of the
exercise of outstanding options, warrants or the conversion of preferred stock
into common shares at December 31, 2007 and 2006, respectively, were not
considered in the computation of loss per share as they would have been
anti-dilutive. However, these common stock equivalents could have potentially
dilutive effects in the future.

-28-

IMAGE TECHNOLOGY LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED
DECEMBER 31, 2007 AND 2006

ACCOUNTING FOR SHARE-BASED PAYMENT
In 2006, the Company adopted SFAS 123 (R) "Share-Based Payment" under the
"modified prospective application". No stock-based compensation awards were
granted in either 2007 or 2006. Stock-based compensation expense recognized in
each of the years ended December 31, 2007 and 2006 was $97,930. For 2007, such
compensation is allocated $88,137 to research and development, $3,722 to sales
and marketing, and $6,071 to general and administrative expenses.

-29-

IMAGE TECHNOLOGY LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED
DECEMBER 31, 2007 AND 2006

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

RECENT ACCOUNTING PRONOUNCEMENTS:
In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error
Corrections" ("SFAS 154") which replaces APB Opinion No. 20 Accounting Changes
and SFAS No. 3, "Reporting Accounting Changes in Interim Financial Statements -
An Amendment of APB Opinion No. 28". SFAS 154 requires retrospective application
to prior period's financial statement of a voluntary change in accounting
principal unless it is not practical. SFAS 154 is effective for accounting
changes and corrections of errors made in fiscal years beginning after December
15, 2005, and was adopted by the Company in the first quarter of fiscal 2006.
The adoption of SFAS 154 by the Company did not have a material impact on the
Company's results of operations, cash flows or financial position.

In September 2006, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards Number 157 - Fair Value Measurements ("SFAS157").
SFAS 157 defines fair value, establishes a framework for measuring fair value in
generally accepted accounting principles ("GAAP"), and expands disclosures about
fair value measurements.

Prior to SFAS 157, there were different definitions of fair value and limited
guidance for applying those definitions in GAAP. Moreover, that guidance was
dispersed among the many accounting pronouncements that require fair value
measurements. SFAS 157 clarifies that the exchange price is the price in an
orderly transaction between market participants to sell the asset or transfer
the liability in the market in which the reporting entity would transact for the
asset or liability, that is, the principal or most advantageous market for the
asset or liability.

SFAS 157 is effective for financial statements issued for fiscal years beginning
after November 15, 2007, and interim periods within those fiscal years. The
Company is currently evaluating the impact, if any, that SFAS 157 will have on
its financial position, results of operations and cash flows.

In June 2006, the Financial Accounting Standards Board ("FASB") issued Financial
Accounting Standards Board Interpretation ("FIN") No. 48, "Accounting for
Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109." FIN
No. 48 provides a comprehensive model for the recognition, measurement and
disclosure in the financial statements of uncertain tax positions taken or
expected to be taken on a tax return. The Company adopted FIN No. 48 on January
1, 2007. Adoption of FIN No. 48 did not have a material impact on the Company's
financial position, results of operations or cash flows.

In September 2006, the Securities and Exchange Commission issued SAB No. 108,
"Considering the Effects of Prior Year Misstatements when Quantifying
Misstatements in Current Year Financial Statements." SAB No. 108 was issued to
address diversity in practice in quantifying financial statement misstatements.
Current practice allows for the evaluation of materiality on the basis of either
(1) the error quantified as the amount by which the current year income
statement was misstated ("rollover method") or (2) the cumulative error
quantified as the cumulative amount by which the current year balance sheet was
misstated ("iron curtain method"). The guidance provided in SAB 108 requires
both methods to be used in evaluating materiality ("dual approach"). SAB No. 108
permits companies to initially apply its provisions either by (1) restating

-30-

IMAGE TECHNOLOGY LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED
DECEMBER 31, 2007 AND 2006

prior financial statements as if the dual approach had always been used or (2)
recording the cumulative effect of initially applying the "dual approach" as
adjustments to the carrying values of assets and liabilities as of January 1,
2006 with an offsetting adjustment recorded to the opening balance of retained
earnings. There were no matters warranting the Company's consideration under the
provisions of SAB No. 108 and, therefore, it did not have an impact on the
Company's financial position, results of operations, earnings per share or cash
flows.

NOTE 3 - EQUIPMENT AND IMPROVEMENTS:
Equipment and improvements consist of the
following at December 31, 2007:

Equipment $384,376
Furniture 9,140
Leasehold improvements 3,505
--------
Total 397,021
Less accumulated depreciation and amortization 260,804
--------
Total $136,217
========

Depreciation and amortization expense amounted to $61,751 and $56,816 in 2007
and 2006, 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 Dr.
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. In December 2005, the Estate of Dr. Ryon loaned the Company an
additional $36,000 under an amendment to the December 2004 promissory note and
the payment schedule was renegotiated to begin in January 2007. Additional
amounts were loaned to the Company in March 2006 for $22,500, in August 2006 for
$57,672 and in September 2006 for $153,375.26. These amounts, along with other
previous loans to the Company by the largest stockholder totaling $374,548 were
converted to 1000 shares of Cumulative Convertible Preferred Series B stock in
late September 2006, and all accrued interest was forgiven.

In May 2007, our largest shareholder provided $3,684 to the Company as an
interest-free loan in order to retain RIS/PACS market consultants. There are no
repayment terms to this loan and the Company has classified the obligation as
long-term.

-31-

IMAGE TECHNOLOGY LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED
DECEMBER 31, 2007 AND 2006

NOTE 5 - LONG-TERM DEBT:
In February 2004, the Company borrowed $125,000 from Valley Commercial Capital,
LLC ("Valley"). This loan was evidenced by a promissory note, which provided for
interest at 8% per annum and called 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
provided for interest at 8% per annum and called for monthly payments of
principal and interest of $4,356 through March 29, 2007. The remaining balance
of these loans, $57,672, was paid in August 2006 as described in Note 4.

NOTE 6 - ACCRUED COMPENSATION PAYABLE TO STOCKHOLDERS:
As of December 31, 2007, accrued compensation payable to stockholders was
$47,596, all of which is reflected as a current liability.

NOTE 7 - STOCKHOLDERS' DEFICIENCY:
PREFERRED STOCK:
As of December 31, 2007, 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.

The Company converted a total of $374,548 of debt owed to our largest
shareholder to 1,000 shares of Image Technology Laboratories Convertible
Preferred Stock Series B issued to same shareholder in late September 2006.
Convertible Preferred Stock Series B can be converted to common stock of Image
Technology Laboratories at a ratio of one share of Convertible Preferred Stock
Series B to 2,700 shares of common stock. Either the shareholder or the Company
may elect to force conversion after two years in units of 100 shares of
Convertible Preferred Stock Series B. The Company may also elect to repurchase
the Convertible Preferred Stock Series B in units of 100 shares of Convertible
Preferred Stock Series B at any time for $432 per share of Convertible Preferred
Stock Series B. Dividends accumulate at 12.5 additional shares of Convertible
Preferred Stock Series B per quarter. The underlying common stock, should the
Company or shareholder elect to convert, is unregistered. The voting rights are
set at one vote per share of Convertible Preferred Stock Series B.

The issuance described above was 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.

-32-

IMAGE TECHNOLOGY LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED
DECEMBER 31, 2007 AND 2006

NOTE 8 - INCOME TAXES:
As of December 31, 2007, the Company had net operating loss carryforward of
approximately $2,800,000 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 $48,000
attributable to accrued compensation payable to shareholders. 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 $1,120,000 (of which $1,071,000 was attributable to the net
operating loss carryforwards and $49,000 was attributable to the future
deductibility of the accrued compensation) by an equivalent valuation allowance
as of December 31, 2007.

NOTE 9 - FAIR VALUE OF FINANCIAL INSTRUMENTS:
The Company's financial instruments at December 31, 2007 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.

NOTE 10 - STOCK OPTION PLAN:
In January 1998, the Company's stockholders ratified Image Technology
Laboratories' Stock Option Plan (the "Plan") whereby options for the purchase of
up to 5,000,000 shares of Image Technology Laboratories' common stock may be
granted to key personnel in the form of incentive stock options and
non-statutory stock options, as defined under the Internal Revenue Code. Key
personnel eligible for these awards include our employees, consultants and
non-employee directors. Under the Plan, the exercise price of all options must
be at least 100% of the fair market value of our common shares on the date of
grant. The exercise price of an incentive stock option granted to an optionee
who holds more than ten percent of the combined voting power of all classes of
stock of Image Technology Laboratories 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 generally vest over three years.

On January 24, 2005, the Company granted options under the plan to several key
employees, for the purchase of 550,000 shares of its common stock at $.20 per
share, its fair market value on the date of grant, which are exercisable through
January 24, 2015.

On April 1, 2005, the Company granted options under the plan to Mr. Muradian,
its Chief Executive Officer, for the purchase of 700,000 shares of its common
stock at $.20 per share, its fair market value on the date of grant, which are
exercisable through April 1, 2015. Mr. Muradian resigned from the Company on
January 20, 2006. Mr. Muradian's options were cancelled on April 20, 2006.

-33-

IMAGE TECHNOLOGY LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED
DECEMBER 31, 2007 AND 2006

On April 14, 2005, the Company granted options under the plan to Mr. Edwards,
its Chairman and Chief Technology Officer, for the purchase of 800,000 shares of
its common stock at $.22 per share, 110% of its the fair market value on the
date of grant, which are exercisable through April 14, 2015.

On May 18, 2005, the Company granted options under the plan to several key
employees, for the purchase of 750,000 shares of its common stock at $0.26 per
share, its fair market value on the date of grant, which are exercisable through
May 18, 2015.

AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES

The Estate of Dr. Ryon exercised 600,000 options in June 2005 and his remaining
400,000 options were cancelled at that time. No other options were exercised by
any of the Executive Officers during the fiscal year ended December 31, 2007 or
December 31, 2006. Mr. Muradian resigned from the Company on January 20, 2006
and his 800,000 options were cancelled on April 20, 2006. The value of
unexercised options held by any such persons as of December 31, 2007 was as
follows:

Total number of shares underlying unexercised options 3,100,000
Exercisable options 2,450,000
Un-exercisable Options 650,000
Value of in-the-money options
$ --

-34-

IMAGE TECHNOLOGY LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED
DECEMBER 31, 2007 AND 2006

The following table summarizes information about stock options outstanding at
December 31, 2007

OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------- ------------------------
WEIGHTED
NUMBER AVERAGE WEIGHTED NUMBER WEIGHTED
EXERCISE OUTSTANDING REMAINING AVERAGE OUTSTANDING AVERAGE
PRICE AT CONTRACTUAL EXERCISE AT EXERCISE
RANGE DEC 31, 2007 LIFE (YEARS) PRICE DEC 31, 2007 PRICE
----- ------------ ------------ ----- ------------ -----
$ 0.33 1,000,000 2.0 $ 0.33 1,000,000 $ 0.33
$ 0.20 550,000 7.1 $ 0.20 550,000 $ 0.20
$ 0.22 800,000 7.3 $ 0.22 400,000 $ 0.22
$ 0.26 750,000 7.4 $ 0.26 500,000 $ 0.26
--------- ----- ------- --------- --------
3,100,000 5.6 $ 0.26 2,450,000 $ 0.27
========= ===== ======= ========= ========

A summary of stock option activity under the plan as of December 31, 2007 and
2006, and changes during the year then ended is as follows:

2007 SHARES WEIGHTED WEIGHTED AGGREGATE
AVERAGE AVERAGE INTRINSIC
EXERCISE REMAINING VALUE
PRICE CONTRACTUAL
--------------------------------------------------------------------------------
TERM

Options outstanding at
December 31, 2006 3,100,000 $ 0.26
Options granted 0 $ 0
Options exercised 0 $ 0
Options forfeited or expired 0 $ 0
--------- --------
Outstanding at
December 31, 2007 3,100,000 $ 0.26 5.6 $ 0
========= ======== ======= =========
Exercisable at
December 31, 2007 2,450,000 $ 0.27 5.1 $ 0
========= ======== ======= =========

2006 SHARES WEIGHTED WEIGHTED AGGREGATE
AVERAGE AVERAGE INTRINSIC
EXERCISE REMAINING VALUE
PRICE CONTRACTUAL
TERM
--------------------------------------------------------------------------------
Options outstanding at
December 31, 2005 3,900,000 $ 0.26
Options granted 0 $ 0
Options exercised 0 $ 0
Options forfeited or expired 800,000 $ 0.27
--------- ------
Outstanding at
December 31, 2006 3,100,000 $ 0.26 6.6 $ 0
========= ====== ======= =========
Exercisable at
December 31, 2006 2,000,000 $ 0.27 5.6 $ 0
========= ====== ======= =========

-35-

IMAGE TECHNOLOGY LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED
DECEMBER 31, 2007 AND 2006

As of December 31, 2007, there was $70,053 of total unrecognized compensation
cost related to non-vested share-based compensation arrangements granted under
the stock option plan.

NOTE 11 - WARRANTS

As of December 31, 2007, the Company had 230,000 warrants outstanding at an
exercise price of $0.33 per share. The warrants expire in 2010.

NOTE 12 - WORKING CAPITAL LOAN AGREEMENT:
During September 2002, the Company entered into a one-year working capital loan
agreement with a financial institution for borrowings of up to $75,000. The
agreement automatically renews annually 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 former principal stockholder. At December 31, 2007, there was $73,467
outstanding under this agreement.

NOTE 13 - 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 15th, 2004, the Arbitrator awarded
attorneys' fees and arbitration expenses totaling $120,810 and $9,250,
respectively to Dr. Phelps. A total of $130,060 was added to the expenses in the
Company's 2004 and 2005 Statement of Operations and the liabilities have been
increased by the same amount in the Company's Balance Sheets of December 31,
2004 and December 31, 2005.

-36-

In September 2006, the Company entered into a Settlement Agreement with Dr.
Phelps whereby the Company paid Dr. Phelps a total of $153,375.26, consisting of
attorneys' fees awarded by the arbitrator and confirmed by the court plus
interest calculated at a rate of nine percent per annum from September 4, 2004
until September 1, 2006. Additionally, as part of the Settlement Agreement, Dr.
Phelps resold 2,309,583 shares of common stock of Image Technology Laboratories
to the Company at $0.10 per share. An 8-K was filed with the Securities and
Exchange Commission on October 4, 2006 detailing this event.

On January 17, 2006, Barry C. Muradian informed the Company of his resignation
as President, Chief Executive Officer and Principal Accounting Officer,
effective January 20 2006. An 8-K was filed with the Securities and Exchange
Commission on January 20 2006. In May 2006, the Company and Mr. Muradian signed
a "Confidential Separation Agreement, Waiver and General Release". As part of
this agreement, Mr. Muradian was paid a total of approximately $22,500, which
represents all guaranteed payments due and owing to Mr. Muradian for salary and
expenses.

NOTE 14 - COMMITMENTS
The Company is obligated for office space under an operating lease agreement
expiring in September 2012. Future minimum annual lease payments will
approximate $36,000 per year through December 2012.

Annual rent expense for the years ended December 31, 2007 and 2006 was
approximately $15,460 and $10,700, respectively.

-37-

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

On March 3, 2006, the Company's Board of Directors elected to engage Berenson
LLP to act as the Company's new independent registered accounting firm and
auditors.

On May 15, 2007, the Company's independent registered accounting firm, Berenson,
LLP, terminated their services to the Company as a result of a combination with
the Company's prior independent registered accounting firm, J.H. Cohn, LLP,
whose engagement was discontinued by an election of the Company's Board of
Directors in 2005.

On February 1, 2008, the Company's Board of Directors elected to engage UHY LLP
to act as the Company's new independent registered accounting firm and auditors.

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, 2007 that
materially affected, or are reasonably likely to materially affect, our internal
controls over financial reporting.

ITEM 8B, OTHER INFORMATION

None.

-38-

PART III

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

SECTION 16(A) REPORTING
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the
Company's directors and executive officers, and persons who own more than ten
percent of a registered class of the Company's Common Stock, to file with the
Securities and Exchange Commission initial reports of ownership and reports of
changes in ownership of the Common Stock of the Company. Officers, directors and
greater-than-ten-percent stockholders are required by SEC regulations to furnish
the Company with copies of all Section 16(a) forms they file. To the Company's
knowledge, based solely on review of the copies of such reports furnished to the
Company and written representations that no other reports were required, during
the fiscal year ended December 31, 2007, all Section 16(a) filing requirements
applicable to its officers and directors have been complied with.

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 14. 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.

Image Technology Laboratories has not paid any compensation to its directors or
executive officers from its inception through December 31, 1999. Upon their
appointment to the Board in April 2002, the Company agreed to issue 10,000
shares of the Company's common stock to each of Messrs. Norell, Carpenter and
Naccarato in consideration for their serving as directors.

All directors of Image Technology Laboratories hold office until the next annual
meeting of shareholders or until their successors are elected and qualified. At
present, Image Technology Laboratories' Bylaws provide for not less than one
director nor more than fifteen. Currently, there are six directors of Image
Technology Laboratories. The Bylaws permit the Board of Directors to fill any
vacancy and such director may serve until the next annual meeting of
shareholders or until his successor is elected and qualified. Officers serve at
the discretion of the Board of Directors. There are no family relationships
among any officers or directors of Image Technology Laboratories, Inc.

LEWIS M. EDWARDS, 53, is a founder and principal stockholder of Image Technology
Laboratories, Inc. and a co-developer of WarpSpeed. He was appointed to the
Board of Directors and elected by the Board to serve as the Company's Vice
President of Research and Development and Chief Technology Officer in December
1997. Mr. Edwards was promoted to Executive Vice-President of Research and
Development and Chairman of the Board of Directors in December 2004. Mr. Edwards
has served as a Senior Technical Staff Member at IBM since 1993, having joined
IBM as a junior engineer in 1976. He was an architect and lead software designer
for IBM's RS/6000 SP, a massive parallel processor. From 1982 to 1993 he served
as the head of engineering for Graphic Systems Labs, a CAD/CAM Independent
Business Unit start-up company within IBM. He is a member of the IEEE and ACM
professional societies. He has provided computer and network consulting services
to Boeing, General Motors, Chrysler, Ford and the Federal government's FAA and
ATC teams. He holds a Bachelor of Science in Electrical Engineering magna cum
laude from Princeton University and an Master of Science in Computer Engineering
from Syracuse University.

-39-

RICHARD V. NORELL, 62, was appointed to our Board of Directors in April 2002.
Since 1995 he has served as a consultant in securities law compliance matters,
after being employed 26 years with the U.S. Securities and Exchange Commission,
Washington, D.C. in the Division of Enforcement, from 1972 to 1995. Mr. Norell
acted as the Division's Chief of Market Surveillance overseeing the Division's
investigators and financial analysts. In addition to implementing programs for
detecting securities fraud and improper conduct, Mr. Norell advised the Director
of the Division concerning policy issues and emerging problems in the securities
industry. Mr. Norell graduated American University, Washington, D.C. with an MBA
in Investment Analysis, University of Rochester, Rochester, N.Y. Bachelor of
Arts, in Economics. Mr. Norell currently resides in Great Falls, VA.

ROBERT G. CARPENTER, 70, was appointed to our Board of Directors in April 2002.
Mr. Carpenter brings extensive business experience from a career spanning over
30 years in a succession of executive management positions overseeing
technology, engineering, marketing and business development at Bell Research
Labs in NJ, IBM Yorktown Heights Research Center, and IBM Development Labs in
Kingston and Poughkeepsie, NY. Retired from IBM in 1991, Mr. Carpenter currently
serves as Chief Engineering Liaison on a $6.7 million water facilities project
in the County of Ulster, NY. Mr. Carpenter resides in Saugerties, NY.

JOHN J. NACCARATO, 75, was appointed to our Board of Directors in April 2002. He
served for 26 years as District Representative to the late United States
Congressman Hamilton Fish, Jr., with oversight responsibility for three District
offices, under the direct supervision of Congressman Fish. From 1988 to the
present, Mr. Naccarato has held the office of Ulster County Legislator, serving
on Mental Health and Ways and Means committees, and chairing the Criminal
Justice / Public Safety Committee. A former President of the Central
Businessmen's Association, Mr. Naccarato serves on the Ulster County Community
Action Board, United Way Board, City of Kingston Board of Assessment, and the
board of the Catskill Regional OTB Corporation. Mr. Naccarato currently resides
in Kingston, NY.

VALERIE E. MCDOWELL, 62, was appointed to the Board of Directors on October 2007
and is a principal stockholder of Image Technology Laboratories, Inc. (ITL).
Most recently Valerie has advised and assisted ITL with additional financing
along with providing guidance in the area of financial matters. Ms. McDowell
brings over 33 years of experience in all facets of the financial markets to
ITL. McDowell was instrumental in structuring the Initial Public Offering for
ITL through her expertise and extensive financial contacts. Valerie has been a
head/senior trader on several trading desks, and was a Managing Director and
partner with the Broker/Dealer, William Allen & Co. Ms. McDowell is an expert
witness for Technical Advisory Service for Attorneys (TASA) in the area of short
selling on Wall Street. Currently, Valerie resides in Mantoloking, NJ.

RICHARD A. GOLDMAN, 63, was appointed to the Board of Directors in October of
2007. Mr. Goldman had a long and successful career in financial services. His
last assignment was a Chief Operating Officer of ProFund Advisors LLC, a
mid-sized mutual fund company. Prior to that Goldman had been President of Home
Life Insurance Company up to its merger with Phoenix Mutual, Managing Director
at Deutsche Asset Management running the Financial Institutions Group as well as
heading Relationship Management for the US, and a senior consultant at
Towers-Perrin's Tillinghast Division. Goldman started at Northwestern Mutual
where he served as the General Agent for the Delaware Valley area headquartered
in Philadelphia and as a company officer in Milwaukee working on key projects

-40-

for the CEO and President. Mr. Goldman is a member of the National Association
of Corporate Directors through which he completed the Director Professionalism
Course, receiving the Certificate of Director Education. Currently, Dick is
retired in Mantoloking, NJ where he is owner and operates a boat dealership. Mr.
Goldman graduated from The American College in Bryn Mawr, PA. with a Masters of
Science in Financial Services, University of North Carolina, Chapel Hill, NC
with a Bachelor of Art in History.

NON-DIRECTOR EXECUTIVE OFFICERS

BARRY MURADIAN, 51, was President, Chief Executive Officer and Principal
Accounting Officer of Image Technology Laboratories, Inc. since December 2004
until his resignation in January 2006. Mr. Muradian was formerly Vice President
and Chief Operating Officer of Image Technology Laboratories since May 2004.

-41-

ITEM 10. EXECUTIVE COMPENSATION

The following table sets forth information for each of the Company's fiscal
years ended December 31, 2007 and 2006 concerning compensation of (i) all
individuals serving as the Company's Chief Executive Officer during the fiscal
year ended December 31, 2007 and (ii) each other executive officer of the
Company whose total annual salary and bonus equaled or exceeded $100,000 in the
fiscal year ended December 31, 2007:

ANNUAL COMPENSATION

OTHER ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) ($) ANNUAL COMPENSATION (S)
---------------------------- ----- ---------- --------- ---------- ----------------

Lewis M. Edwards 2007 $150,000 $ 0 (1)
Chairman,
Executive Vice-President, 2006 $150,000 $ 0
Chief Technical Officer

Barry C. Muradian (2) 2007 0 $ 0 (1)
President and Chief 2006 $ 0
Executive Officer $150,000

(1) See "Option Grants in Last Fiscal Year" below
(2) Mr. Muradian joined the Company in May 2004 as Chief Operating Officer
and was appointed President and Chief Executive Officer in December
2004 and Principal Accounting Officer in January 2005. Mr. Muradian
resigned from the Company in January 2006. In May 2006, the Company
and Mr. Muradian signed a "Confidential Separation Agreement, Waiver
and General Release". As part of this agreement, Mr. Muradian was paid
a total of approximately $22,500, which represents all guaranteed
payments due and owing to Mr. Muradian for salary and expenses.

EMPLOYMENT AGREEMENTS

Barry C. Muradian, pursuant to an employment agreement dated May 5, 2004, was
engaged as President, Chief Executive Officer and Principal Accounting Officer
of Image Technology Laboratories through December 31, 2005. Mr Muradian resigned
from the Company in January 2006.

Lewis M. Edwards is engaged as Executive Vice President, Chief Technical
Officer, Principal Accounting Officer and Chairman. Mr. Edwards did not renew
his prior employment agreement in 2007 and to date, has not renewed his
employment agreement for 2008. He has been provided with the following:

-a minimum annual base salary of $150,000 payable in regular equal installments
in accordance with our general payroll practices.

-an annual performance bonus at the end of each calendar year as determined in
good faith by the Board based upon its annually established goals. Since the
beginning of his employment by the Company, Mr. Edwards has not received any
annual performance bonus.

-42-

- participation in all retirement plans, health and other group insurance
programs, stock option plans and other fringe benefit plans which we may now or
hereafter in the Board of Directors' discretion make available generally to its
executives or employees. Since the beginning of his employment by the Company,
Mr. Edwards has not participated in any retirement plan, health or other group
insurance program.

- term life insurance in the amount of $300,000, short-term and long-term
disability insurance in the amount of not less than 60% of base salary, unless
such insurance is not available at commercially reasonable rates. Since the
beginning of his employment by the Company, Mr. Edwards has not been provided
with term life or disability insurance.

OPTION GRANTS IN LAST FISCAL YEAR

There were no options granted to any Executive Officers during 2007.

-43-

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

The following table sets forth, as of April 2, 2008, 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.

------------------------------------------------------------------------------------------------------
AMOUNT AND NATURE OF
NAME AND ADDRESS OF BENEFICIAL OWNERSHIP PERCENT OF OUTSTANDING
BENEFICIAL OWNER TITLE OF CLASS AS OF APRIL 2, 2008(1) SHARES IN CLASS (2)
------------------------------------------------------------------------------------------------------

EXECUTIVE OFFICERS AND DIRECTORS

---------------------------------------------------- -------------------------------------------------

Lewis M. Edwards
602 Enterprise Drive, TechCity
Kingston, New York 12401 Common Stock 4,379,583 28.74%
Preferred Stock A 500,000 33.33%

---------------------------------------------------- -------------------------------------------------
Richard V. Norell
602 Enterprise Drive, TechCity
Kingston, New York 12401 Common Stock 340,500 2.23%

---------------------------------------------------- -------------------------------------------------
Robert G. Carpenter
602 Enterprise Drive, TechCity
Kingston, New York 12401 Common Stock 395,000 2.59%

---------------------------------------------------- -------------------------------------------------
John J. Naccarato
602 Enterprise Drive, TechCity
Kingston, New York 12401 Common Stock 70,000 *

---------------------------------------------------- -------------------------------------------------
Valerie McDowell
602 Enterprise Drive, TechCity
Kingston, New York 12401 Common Stock 4,136,667 27.15%
Preferred Stock A 500,000 33.33%
Preferred Stock B 1,050 100.00%

---------------------------------------------------- -------------------------------------------------
Richard Goldman
602 Enterprise Drive, TechCity
Kingston, New York 12401 Common Stock 25,000 *

---------------------------------------------------- -------------------------------------------------
ALL OFFICERS AND DIRECTORS
AS A GROUP
Common Stock 9,321,750 61.17%
Preferred Stock A 1,000,000 66.66%
Preferred Stock B 1,050 100.00%
------------------------------------------------------------------------------------------------------

GREATER THAN 5% SHAREHOLDERS
Allen M. McDowell
7 Tall Timber Drive
Morristown, NJ 07960 Common Stock 1,133,833 7.44%
---------------------------------------------------- -------------------------------------------------

-44-

(1) Includes for Mr. Edwards, options to purchase 1,600,000 shares of common
stock exercisable within 60 days, and warrants for Mr. Carpenter to
purchase 135,000 shares of common stock.

(2) Based upon 15,238,778 shares of common stock, 1,500,000 shares of
preferred stock Series A and 1,050 shares of preferred stock Series B
outstanding.

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

On January 17 2006, Barry C. Muradian informed the Company of his resignation as
President, Chief Executive Officer and Principal Accounting Officer, effective
January 20 2006. An 8-K was filed with the Securities and Exchange Commission on
January 20 2006. In May 2006, the Company and Mr. Muradian signed a
"Confidential Separation Agreement, Waiver and General Release". As part of this
agreement, Mr. Muradian was paid a total of approximately $22,500, which
represents all guaranteed payments due and owing to Mr. Muradian for salary and
expenses.

In May 2007, our largest shareholder provided $3,684 to the Company as an
interest-free loan in order to retain RIS/PACS market consultants. There are no
repayment terms to this loan.

-45-

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
14 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.

-46-

ITEM 14. PRINCIPAL ACCOUNTANTS' FEES AND SERVICES

AUDIT FEES

For the fiscal year ended 2007, our Independent Registered Public Accounting
Firm, UHY LLP, charged aggregate fees of $40,000 for the audit of our annual
financial statements and 10-KSB.

For the fiscal year ended 2006, our former Independent Registered Public
Accounting Firm, Berenson LLP, charged aggregate fees of $46,525 for the audit
of our annual financial statements and 10-KSB.

AUDIT RELATED FEES

For the fiscal year ended 2007, our Independent Registered Public Accounting
Firm, UHY LLP charged aggregate fees of $0 for work related to the audit of our
annual financial.

For the fiscal year ended 2006, our former Independent Registered Public
Accounting Firm, Berenson LLP, charged aggregate fees of $0 for work related to
the audit of our annual financial.

TAX FEES:

For the fiscal year ended 2005, our Independent Registered Public Accounting
Firm, UHY LLP, charged aggregate fees of $0 for tax services.

For the fiscal year ended 2006, our former Independent Registered Public
Accounting Firm, Berenson LLP, charged aggregate fees of $0 for tax services.

ALL OTHER FEES:

For the fiscal year ended 2005, our Independent Registered Public Accounting
Firm, UHY LLP, charged $0 for other fees.

For the fiscal year ended 2006, our former Independent Registered Public
Accounting Firm, Berenson LLP, charged $0 for other fees.

-47-

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/ LEWIS M. EDWARDS
------------------------
LEWIS M. EDWARDS,
CHIEF TECHNOLOGY OFFICER AND
PRINCIPAL ACCOUNTING OFFICER

DATE: APRIL 15, 2008

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, APRIL 15, 2008
-------------------------------------- BOARD OF DIRECTORS
LEWIS M. EDWARDS

/S/ ROBERT CARPENTER DIRECTOR APRIL 15, 2008
--------------------------------------
ROBERT CARPENTER

/S/ JOHN NACCARATO DIRECTOR APRIL 15, 2008
--------------------------------------
JOHN NACCARATO

/S/ RICHARD NORRELL DIRECTOR APRIL 15, 2008
--------------------------------------
RICHARD NORRELL

/S/ VALERIE MCDOWELL DIRECTOR APRIL 15, 2008
--------------------------------------
VALERIE MCDOWELL

/S/ RICHARD GOLDMAN DIRECTOR APRIL 15, 2008
--------------------------------------
RICHARD GOLDMAN

-48-