Edgar Filing: COLOR IMAGING INC

As filed with the Securities and Exchange Commission on May ____, 2002

Registration No. 333-76090

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 4 TO
FORM SB-2
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933

COLOR IMAGING, INC.
(Name of Small Business Issuer in Its Charter)

Delaware 3861 13-3453420
(State or Jurisdiction of (Primary Standard Industrial (IRS Employer Identification
Incorporation or Organization) Classification Code Number) Number)

4350 Peachtree Industrial Boulevard, Suite 100
Norcross, Georgia 30071
(770) 840-1090
(Address and Telephone Number of Principal Executive Offices)

Michael W. Brennan, Chief Executive Officer
Color Imaging, Inc.
4350 Peachtree Industrial Boulevard, Suite 100
Norcross, Georgia 30071
(770) 840-1090; Fax: (770) 242-3494
(Name, Address and Telephone Number of Agent for Service)

Copies to:
T. Clark Fitzgerald III, Esq.
Anthony L. Duncan, Esq.
Arnall Golden Gregory LLP
2800 One Atlantic Center
Atlanta, Georgia 30309-3450
(404) 873-8150; Fax: (404) 873-8151)

Approximate Date of Commencement of Proposed Sale to the Public: As soon as
practicable from time to time after the effective date of this registration
statement.

If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of earlier effective registration
statement for the same offering. [_]

If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]

If this form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]

If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]

CALCULATION OF REGISTRATION FEE

Proposed Maximum Proposed Maximum
Title of Each Class Amount to Be Offering Price Aggregate Offering Amount Of
of Securities to be Registered Registered Per Share Price Registered Fee
---------------------------------------- ------------------ ---------------------- ---------------------- -------------------

Common Stock, $.01 par value
offered by selling stockholders 3,959,487 $ 3.10(1) $ 12,274,409.70(1) $ 1,129.25

Units, each consisting of: (3)
(i) One share of Common Stock,
$.01 par value; and 3,500,000 $ 2.00 $ 7,000,000.00 $ 644.00

(ii) One warrant to purchase one share
of Common Stock, $.01 par value 3,500,000 $ 2.00(2) $ 7,000,000.00 $ 644.00

Common Stock, $.01 par value (3) 7,000,000 $ 1.40 $ 9,800,000.00 (3)
------------------ ---------------------- ---------------------- -------------------
Total 10,959,487 $ 26,274,409.70 $ 2,417.25(4)

(1) Estimated solely for purpose of calculating the registration fee in
accordance with Rule 457(c) under the Securities Act of 1933. Based on the
average of the bid and ask price per share of Common Stock of the
registrant as reported on the OTC Bulletin Board on December 24, 2001.
(2) Based upon the exercise price of the warrants.
(3) We are offering up to either 3,500,000 Units consisting of one share of
common stock and one warrant to purchase one share of common stock or
7,000,000 shares of common stock or a combination thereof. The fee has been
calculated based upon the higher Unit price of $2.00 per Unit.
(4) $4,010 previously paid. The filing fee has been adjusted in accordance with
the Investor and Capital Markets Fee Relief Act signed January 16, 2002.

The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this registration statement shall become
effective on such date as the Commission acting pursuant to said Section 8(a),
may determine.

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

PRELIMINARY PROSPECTUS, DATED MAY 31, 2002

UP TO
3,500,000 UNITS OF COMMON STOCK AND WARRANTS
OR
7,000,000 SHARES
OFFERED BY
COLOR IMAGING, INC.
AND
3,959,487 SHARES OFFERED BY SELLING STOCKHOLDERS

Color Imaging, Inc. is offering to sell up to 3,500,000 Units representing an
aggregate of 3,500,000 shares of common stock and warrants exercisable into
3,500,000 shares of common stock. The price per Unit is $2.00 for an aggregate
offering price of $7,000,000. Each Unit consists of one share of common stock
and a warrant to purchase one share of common stock at an exercise price of
$2.00. The warrant expires on December 31, 2003. We will require investors to
purchase at least 100,000 Units. See "Description of Securities."

Alternatively, investors purchasing a minimum of 1,000,000 shares of our common
stock may purchase such shares at $1.40 per share; provided that, any such
purchaser agrees to a contractual lock-up for a period of 9 months. Shares of
common stock purchased at $1.40 per share will not include warrants. We will
sell the Units and our common stock on a best-efforts basis and our offering
will terminate on June 30, 2003, unless the entire offering has been sold prior
to that time or otherwise terminated or extended until December 31, 2003.

Our offer is limited to a maximum of either 7,000,000 shares of common stock or
3,500,000 Units or a combination thereof.

Our selling stockholders are offering to sell up to 3,959,487 shares of common
stock. The selling stockholders may sell our common stock on the open market at
market prices in ordinary broker transactions or in negotiated transactions, and
they may pay broker commissions in connection with such transactions. We will
not receive any of the proceeds of sale of such stock, except and unless shares
of our common stock underlying warrants held by the selling stockholders are
exercised other than by cashless exercise, nor pay any broker commissions in
connection with such sales.

Our common stock is quoted on the OTC Bulletin Board under the symbol CIMG. On
May 30, 2002, the closing price of our stock was $2.10 per share.

There is no public market for our warrants. We do not intend to apply, and are
not obligated to apply, for listing of the warrants on any securities exchange
or automated quotation system.

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

You should carefully consider each of the risk factors described under "Risk
Factors" beginning on page 4 of this prospectus.

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

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

The date of this prospectus is May __, 2002

TABLE OF CONTENTS

Page

Prospectus Summary.............................................................1
Risk Factors...................................................................4
Use Of Proceeds...............................................................10
Capitalization................................................................11
The Company...................................................................12
Market For Common Stock And Related Stockholder Matters.......................19
Management's Discussion And Analysis..........................................20
Directors, Executive Officers, Promoters And Control Persons..................25
Security Ownership Of Certain Beneficial Owners And Management................30
Certain Relationships And Related Transactions................................31
Description Of Securities.....................................................32
Material Federal Tax Considerations...........................................34
Selling Stockholders..........................................................35
Plan Of Distribution..........................................................39
Legal Matters.................................................................41
Independent Auditors..........................................................41
Indemnification...............................................................41
Further Information...........................................................41
Index To Consolidated Condensed Financial Statements.........................F-1

PROSPECTUS SUMMARY

You should read this summary together with the other information contained in
other parts of this prospectus. Because it is a summary, it does not contain all
of the information that you should consider before investing in our common
stock.

COLOR IMAGING, INC.

OVERVIEW

We develop, manufacture and market products used in electronic printing, analog
and digital copiers and supply high-speed digital printing systems. These high
speed digital printing systems print in real-time directly on offset presses.
Offset presses are presses that utilize plates and ink to print on paper and
other materials. We conduct our business through two separate operating units,
Color Imaging, Inc. ("Color"), and Logical Imaging Solutions, Inc. ("Logical").
Color develops, purchases from others and markets electronic printing products,
including black text, color, magnetic character recognition and specialty
toners, and provides other parts and accessories for laser printers and digital
copiers. Logical designs, manufactures and integrates proprietary software and
hardware with components made by third parties into a complete printing system
and offers related technical support and supplies. Logical's printing system
allows commercial printers to digitally process and print data and images that
may change from page to page, also known as variable data, at high speeds
directly on commercial offset web presses. This capability saves time and money
for the printer and customer.

COLOR

Since 1989, Color has developed and manufactured products used in electronic
printing. Color formulates and produces black text and specialty toners,
including color and magnetic character recognition toners for numerous laser
printers. Color's toners permit the printing of a wide range of user-selected
colors and also the full process color printing of cyan, yellow, magenta and
black. Magnetic character recognition toners enable the printing of magnetic
characters which are required for the high-speed processing of checks and other
financial documents. Color also supplies other consumable products used in
electronic printing, and photocopying, including toner cartridges, cartridge
components, photoreceptors and imaging drums.

Color has continually expanded its product line and manufacturing capabilities.
This expansion has led to the creation of more than 130 different black text,
color, magnetic character recognition and specialty toner formulations,
including aftermarket toners and imaging products for printers and facsimile
machines manufactured by Brother(TM), Canon(TM), Delphax(TM), Hewlett
Packard(TM), IBM(TM), Lexmark(TM), Sharp(TM), Xerox(TM), Minolta(TM), Mita(TM),
Panafax(TM), Pentax(TM), Pitney Bowes(TM), Epson(TM), Fuji-Xerox(TM),
Toshiba(TM), Kyocera(TM), Okidata(TM), Panasonic(TM), and printing systems
developed by Logical. Color also manufacturers and or markets toners for use in
Ricoh, Sharp(TM), Xerox(TM), Canon(TM), Lanier(TM) and Toshiba(TM) copiers.
Color also offers product enhancements, including imaging supplies that enable
standard laser printers to print magnetic character recognition data. Color
markets branded products directly to OEMs and its aftermarket products worldwide
to distributors and remanufacturers of laser printer toner cartridges and to
dealers and distributors of copier products.

LOGICAL

Logical designs, assembles and markets a complete printing system, SOLUTION2000,
to commercial printers. When installed directly on an offset printing press, the
SOLUTION2000 expands printing capabilities to include the printing of variable
data and images, including bar codes, magnetic character recognition data and
unlimited alphanumeric sequencing. These functions allow commercial printers to
digitally process and print variable data at high speeds where previously they
were able to only print fixed images from printing plates or cylinders installed
on their offset printing presses. Since its founding in 1993, Logical's
development efforts have focused on creating a high-speed digital variable data
printing system for commercial printing applications that combines software,
hardware and consumable products not only for black text for image printing but
also in color. Logical also offers a full line of consumable products, including
toners, print cartridges and toner fusing assemblies. Our strategy is to
continually build an installed base of printer systems that will generate a
recurring demand for these consumable products.

Logical is developing the DigitalColorPress, a Solution series of printing
systems incorporating color printing capabilities. The DigitalColorPress can
print variable data in color at rates exceeding 250 pages-per-minute. This is in
contrast to other products which do not print directly on the press and print at
speeds of approximately 85 pages per minute. We believe that this represents an
attractive alternative for high-speed offset printing applications because it
reduces steps and labor in the print process. We intend to market Logical's
DigitalColorPress color printing system as an enhancement to existing Solution
series installations and as an upgrade for other printing systems.

THE OFFERING

This prospectus relates to an offering by us of up to 3,500,000 Units
representing an aggregate of 3,500,000 shares of common stock and warrants
exercisable into 3,500,000 shares of common stock. The price per Unit is $2.00
for an aggregate offering price of $7,000,000. Each Unit consists of one share
of common stock and a warrant to purchase one share of common stock at an
exercise price of $2.00. The warrant expires on December 31, 2003. We will
require investors to purchase at least 100,000 Units.

Alternatively, investors purchasing a minimum of 1,000,000 shares of our common
stock may purchase such shares at $1.40 per share; provided that any such
purchaser agrees to a contractual lock-up for a period of 9 months. Shares of
common stock purchased at $1.40 per share will not include warrants. We will
sell the Units and our common stock on a best-efforts basis and our offering
will terminate on June 30, 2003, unless the entire offering has been sold prior
to that time or otherwise terminated or extended until December 31, 2003. There
will be no escrow account. We will immediately use all of the proceeds received
from the sale of the Units.

Our offer is limited to a maximum of either 7,000,000 shares of common stock or
3,500,000 Units or a combination thereof.

There is no public market for our warrants. We do not intend to apply, and are
not obligated to apply, for listing of the warrants on any securities exchange
or automated quotation system.

This prospectus also relates to the resale of up to 3,959,487 shares of our
common stock by several of our stockholders. The selling stockholders are not
required to sell our common stock and sales of our stock are entirely at the
discretion of the selling stockholders. The selling stockholders may sell such
stock either on the open market at market prices in ordinary broker transactions
or in negotiated transactions, and they may pay broker commissions in connection
with such transactions. The selling stockholders may offer their shares at a
price that is lower than the price we offer our shares. We will not receive any
of the proceeds of sale of our stock by the selling stockholders, except and
unless shares of our common stock underlying warrants held by the selling
stockholders are exercised other than by cashless exercise, nor will we pay any
broker commissions in connection with such sales.

Our common stock is quoted on the OTC Bulletin Board under the symbol CIMG. On
May 30, 2002, the closing price for our stock was $2.10 per share. We will pay
the costs of registering the offer and sale of the securities offered hereby
with the Securities and Exchange Commission and any required state securities
agencies.

Units Offered by Color Imaging, Inc....................................3,500,000

Offering Price Per Unit....................................................$2.00

Common Stock Offered by Selling Stockholders(1)........................3,959,487

OTC Bulletin Board Symbol...................................................CIMG

Common Stock Outstanding Before the Offering..........................10,099,880

Common Stock to be outstanding after the offering (2).................13,599,880

Use of Proceeds from Units Offered by Color Imaging, Inc.(3)..........$6,710,000

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

(1) Includes shares of common stock underlying warrants.

(2) Excludes shares of common stock underlying warrants that comprise the Units
being offered. In the event no Units are sold and all shares of common
stock are subscribed 17,099,880 shares of common stock will be outstanding.

(3) Assumes all Units are sold. In the event that common stock is sold in place
of Units, our net proceeds will increase by $2.8 million and such proceeds
will be used for general corporate purposes, including working capital.

We will receive approximately $6,710,000 in net proceeds (assuming we sell all
the Units) in this offering, excluding any proceeds that may be derived from the
exercise of warrants included in the Units offered by us or by certain selling
stockholders. In the event that common stock is sold in place of Units, our net
proceeds will increase by $2.8 million and the additional proceeds will be used
for general corporate purposes, including working capital. To the extent
proceeds are not required in the amount(s) outlined for the purposes described
hereafter, such proceeds will be used for general corporate purposes. Our
intended uses of the proceeds are listed below in descending order of priority:

For accounts payable and other corporate and offering expenses:.......$1,000,000
To repay affiliate borrowings:........................................$1,000,000
To retire debt:.......................................................$ 375,000
For other general corporate purposes including working capital........$4,335,000

Our executive offices are located at: 4350 Peachtree Industrial Boulevard, Suite
100, Norcross, Georgia 30071 and our telephone number is: (770) 840-1090. . In
this prospectus, "Color," "we," "us," and "our" refer to Color Imaging, Inc. and
its subsidiary, unless otherwise indicated.

RISK FACTORS

Investing in our common stock involves a significant degree of risk. You
should carefully consider the following risk factors and all the other
information contained in this prospectus or incorporated by reference before
investing in our common stock. If any of the following possible adverse events
actually occur, our business, financial condition and results of operations
could suffer, in which case the trading price of our common stock may decline.

FACTORS THAT MAY AFFECT FUTURE RESULTS AND INFORMATION CONCERNING
FORWARD-LOOKING STATEMENTS

Statements contained in this report which are not statements of historical
fact are forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
These forward-looking statements may be identified by the use of forward-looking
terms such as "believes," "expects," "may", "will," "should" or "anticipates" or
by discussions of strategy that involve risks and uncertainties. From time to
time, we have made or may make forward-looking statements, orally or in writing.
These forward-looking statements include statements regarding our ability to
borrow funds from financial institutions or affiliates, to engage in sales of
our securities, our intention to repay certain borrowings from future sales of
our securities, the ability to expand capacity by placing in service additional
manufacturing equipment during 2002, the ability to commercialize our electron
beam imaging technologies and products, our expected acquisition of business or
technologies, our expectation that shipments to international customers will
continue to account for a material portion of net sales, anticipated future
revenues, sales, operations, demand, technology, products, business ventures,
major customers, major suppliers, retention of key officers, management or
employees, competition, capital expenditures, credit arrangements, and other
statements regarding matters that are not historical facts, involve predictions
which are based upon a number of future conditions that ultimately may prove to
be inaccurate. Our actual results, performance or achievements could differ
materially from the results expressed in, or implied by, these forward-looking
statements. Forward-looking statements are made based upon management's current
expectations and beliefs concerning future developments and their potential
effects upon our business. We cannot predict whether future developments
affecting us will be those anticipated by management, and there are a number of
factors that could adversely affect our future operating results or cause our
actual results to differ materially from the estimates or expectations reflected
in such forward-looking statements, including without limitation, those
discussed in the sections titled "The Company" and "Management's Discussion and
Analysis" and the factors set forth below:

RISKS RELATED TO OUR BUSINESS:

We anticipate that we will need to raise additional capital or obtain
funding to finance certain of our planned operating activities over the next
twelve months.

Our failure to raise additional capital in the approximate amount of
$500,000 may significantly limit our ability to finance certain planned
operating activities over the next twelve months that we believe will generate
additional revenues and reduce manufacturing costs. Specifically, we will need
to borrow or raise additional funds to meet the additional planned $500,000 of
vendor commitments for product. We may not be able to obtain additional
financing at commercially reasonable rates, or at all. Our failure to obtain
additional funds would significantly limit or eliminate our ability to conduct
the foregoing activities or we may have to curtail or eliminate other
activities. We anticipate that we will seek additional funding through the
public or private sales of our securities and/or through commercial or private
financing arrangements, including borrowing from affiliates. Adequate funds may
not be available when needed or on terms acceptable to us, or at all. In the
event that we are not able to obtain additional funding on a timely basis, we
may be required to limit any proposed operations, research and development or
expansion.

Approximately 40% of our business depends on a supplier approved by one of
our customers.

Some of our products incorporate technologies that are available from a
particular supplier that has been approved by one of our customers.
Approximately 40% of our sales for the three months ended March 31, 2002 were
derived from products limited to a specific supplier. For the three months ended
March 31, 2002, we purchased 49% of our raw materials, components and supplies
from that same supplier. We do not have a written agreement with this or any
other supplier. We rely on purchase orders. Should we be unable to obtain the
necessary materials from this supplier, product shipments could be prevented or
delayed, which could result in a loss of sales. If we are unable to fulfill
existing orders or accept new orders because of a shortage of materials, we may
lose revenues and risk losing customers.

Our business depends on a limited number of customers.

In the three months ended March 31, 2002, two customers accounted for
approximately 68% of our net sales. We do not have contracts with these
customers and all of the sales to them are made through purchase orders. While
our products typically go through the customer's required qualification process,
which we believe gives us an advantage over other suppliers, this does not
guarantee that the customer will continue to purchase from us. The loss of any
of these customers, including through an acquisition or other business
combination could have a substantial and adverse effect on our business. We have
in the past, and may in the future, lose one or more major customers. If we do
not sell products or services to customers in the quantities anticipated, or if
a major customer terminates its relationship with us, market perception of our
products and technology, growth prospects, and financial condition and results
of operation could be harmed.

Our success is dependent on our ability to successfully develop, or acquire
from third parties, products that we can commercialize and that achieve market
acceptance.

The challenges we face in implementing our business model include
establishing market acceptance of existing products and services and
successfully developing or acquiring new product lines that achieve market
acceptance. We must successfully commercialize the products that are currently
being developed, such as our DigitalColorPress, color and magnetic character
recognition toner for new digital copiers and printers and continue to acquire
from third parties parts, materials and finished product that can be integrated
into finished products or sold as our products. While we have successfully
developed toners in the past and are in the late stages of developing and
testing several new toners and installing our first DigitalColorPress employing
electron beam imaging technologies, we have not commercialized many of the
toners that are under development or fully commercialized the manufacturing of
the DigitalColorPress. While we have in the past acquired from third parties
materials and products that we have been successful in selling, there can be no
assurance that parts, materials or products for new products will be available
or will achieve market acceptance. If we fail to successfully commercialize
products we develop or acquire from third parties, or if these products fail to
achieve market acceptance, our financial condition and results of operation
would be seriously harmed.

Our success is dependent on our ability to utilize available manufacturing
capacity.

From 1999 through 2000, we expanded our manufacturing capacity by acquiring
new manufacturing equipment and moving to a larger location. We intend to
continue to expand capacity by placing in service additional manufacturing
equipment during 2002. To fully utilize these new additions to the factory, new
formulations for toner have to be developed specifically for manufacture on this
new equipment or orders for larger quantities of existing toners must be
obtained. While we have been successful in developing formulas for new equipment
in the past and increasing sales of many of our existing toner products, our
continued success will be dependent on our ability to develop additional
formulations or increase our sales from existing formulations and manufacture
the toners with the new equipment to achieve a reduction in production costs. We
cannot assure you that we will be successful in developing all of the
formulations needed in the future or that we will be able to manufacture toner
at a lower production cost on a regular basis or that such products will achieve
market acceptance. If we are not successful in increasing the sales of our
manufactured products, or if our existing sales from manufactured products
declines, our business will be materially and adversely affected.

Our acquisition strategy may prove unsuccessful.

We intend to pursue acquisitions of businesses or technologies that
management believes complement or expand the existing business. Acquisitions of
this type involve a number of risks, including the possibility that the
operations of any businesses that are acquired will be unprofitable or that
management attention will be diverted from the day-to-day operation of the
existing business. An unsuccessful acquisition could reduce profit margins or
otherwise harm our financial condition, by, for example, impairing liquidity and
causing non-compliance with lending institution's financial covenants. In
addition, any acquisition could result in a dilutive issuance of equity
securities, the incurrence of debt or the loss of key employees. Certain
benefits of any acquisition may depend on the taking of one-time or recurring
accounting charges that may be material. We cannot predict whether any
acquisition undertaken by us will be successfully completed or, if one or more
acquisitions are completed, whether the acquired assets will generate sufficient
revenue to offset the associated costs or other adverse effects.

Our success depends on our ability to develop or acquire intellectual
property rights.

Our success depends in part on our ability to develop proprietary toner
formulas and manufacturing processes, obtain patents, copyrights and trademarks,
maintain trade secret protection and operate without infringing the proprietary
rights of others. Current or future claims of intellectual property infringement
could prevent us from obtaining technology of others and could otherwise
adversely affect our operating results, cash flows, financial position or
business, as could expenses incurred enforcing intellectual property rights
against others or defending against claims that our products infringe the
intellectual property rights of others.

Our intellectual property protection is limited.

While we have two patents and we are preparing an application for a third,
on the whole we do not rely on patents to protect our proprietary rights. We do
rely on a combination of laws such as trade secrets and contractual restrictions
such as confidentiality agreements to protect proprietary rights. Despite any
precautions we have taken:

o laws and contractual restrictions might not be sufficient to prevent
misappropriation of our technology or deter others from developing
similar technologies; and

o policing unauthorized use of our products is difficult, expensive and
time-consuming and we might not be able to determine the extent of
this unauthorized use.

Therefore, there can be no assurance that we can meaningfully protect our
rights in such unpatented proprietary technology or that others will not
independently develop substantially equivalent proprietary products or processes
or otherwise gain access to the proprietary technology. Reverse engineering,
unauthorized copying or other misappropriation of our proprietary technology
could enable third parties to benefit from our technology without paying us
which could significantly harm our business.

Acts of domestic terrorism and war have impacted general economic
conditions and may impact the industry and our ability to operate profitably.

On September 11, 2001, acts of terrorism occurred in New York City and
Washington, D.C. On October 7, 2001, the United States launched military attacks
on Afghanistan. As a result of those terrorist acts and acts of war, there has
been a disruption in general economic activity. The demand for printing products
and services may decline as layoffs in the transportation and other industries
affect the economy as a whole. There may be other consequences resulting from
those acts of terrorism, and any others which may occur in the future, including
civil disturbance, war, riot, epidemics, public demonstration, explosion,
freight embargoes, governmental action, governmental delay, restraint or
inaction, quarantine restrictions, unavailability of capital, equipment,
personnel, which we may not be able to anticipate. These terrorist acts and acts
of war may continue to cause a slowing of the economy, and in turn, reduce the
demand of printing products and services, which would harm our ability to make a
profit. We are unable to predict the long-term impact, if any, of these
incidents or of any acts of war or terrorism in the United States or worldwide
on the U.S. economy, on us or on the price of our common stock.

We depend on the efforts and abilities of certain officers and directors to
continue our operations and generate revenues.

Our success depends to a significant extent on the continued services of
senior management and other key personnel. While we do have employment,
non-compete and confidentiality agreements with executive officers and certain
other key individuals, employment agreements may be terminated by either party
upon giving the required notice. The loss of the services of any of our
executive officers or other key employees could harm our business. Our success
also depends on our ability to attract, retain and motivate highly skilled
employees. Competition for qualified employees in the industries in which we
operate is intense. If we fail to hire and retain a sufficient number of
qualified employees, our business will be adversely affected.

Compliance with government regulations may cause us to incur unforeseen
expenses.

Our black text, color and magnetic character toner supplies and
manufacturing operations are subject to domestic and international laws and
regulations, particularly relating to environmental matters that impose
limitations on the discharge of pollutants into the air, water and soil and
establish standards for treatment, storage and disposal of solid and hazardous
wastes. In addition, we are subject to regulations for storm water discharge,
and as a requirement of the State of Georgia have developed and implemented a
Storm Water Pollution Prevention Plan. We are also required to have a permit
issued by the State of Georgia in order to conduct various aspects of our
business. Compliance with these laws and regulations has not in the past had a
material adverse affect on our capital expenditures, earnings or competitive
position. There can be no assurance, however, that future changes in
environmental laws or regulations, or in the criteria required to obtain or
maintain necessary permits, will not have a material adverse affect on our
operations.

We sell a significant portion of our products internationally, which
exposes us to currency fluctuations and collection and product recall risks.

We sell a significant amount of product to customers outside of the United
States. International sales accounted for 34% of net sales in the three months
ended March 31, 2002 and 9% in the three months ended March 31, 2001. We expect
that shipments to international customers will continue to account for a
material portion of net sales. Most products are priced in U.S. dollars, but
because we do sell products in Europe denominated in Euros, fluctuations in the

Euro could also cause our products there to become less affordable or less
competitive or we may sell some products at a loss to otherwise maintain
profitable business from a customer. Most of our products sold internationally
are on open account, giving rise to the added costs of collection in the event
of non-payment. Further, should a product shipped overseas be defective, the
Company would experience higher costs in connection with a product recall or
return and replacement. We cannot assure you that these factors will not have a
material adverse effect on our international sales and would, as the result,
adversely impact our results of operation and financial condition.

Our quarterly operating results fluctuate as a result of many factors.

Our quarterly operating results fluctuate due to various factors. Some of
these factors include the mix of products sold during the quarter, the
availability and costs of raw materials or components, the costs and benefits of
new product introductions, and customer order and shipment timing. Because of
these factors, our quarterly operating results are difficult to predict and are
likely to vary in the future.

RISKS RELATING TO OUR INDUSTRY:

We operate in a competitive and rapidly changing marketplace.

There is significant competition in the toner, consumable imaging products
and color printing systems industries in which we operate. In addition, the
market for digital color printers and copiers and related consumable products is
subject to rapid change and the OEM technologies are becoming increasingly
difficult barriers to market entry. Many competitors, both OEMs and other after
market firms, have longer operating histories, larger customer bases, greater
brand recognition and significantly greater financial, marketing and other
resources than we do. These competitors may be able to devote substantially more
resources to developing their business than we can. Our ability to compete
depends upon a number of factors, including the success and timing of product
introductions, marketing and distribution capabilities and the quality of our
customer support. Some of these factors are beyond our control. In addition,
competitive pressure to develop new products and technologies could cause our
operating expenses to increase substantially.

Our products have short life cycles and are subject to frequent price
reductions.

The markets in which we operate are characterized by rapidly evolving and
increasingly difficult technologies, frequent new product introductions and
significant price competition. Consequently, our products have short life
cycles, and we must frequently reduce prices in response to product competition.
Our financial condition and results of operations could be adversely affected if
we are unable to manufacture new and competitive products in a timely manner.
Our success depends on our ability to develop and manufacture technologically
advanced products, price them competitively, and achieve cost reductions for
existing products. Technological advances require sustained research and
development efforts, which may be costly and could cause our operating expenses
to increase substantially.

Our financial performance depends on our ability to successfully manage
inventory levels, which is affected by factors beyond our control.

Our financial performance depends in part on our ability to manage
inventory levels to support the needs of new and existing customers. Our ability
to maintain appropriate inventory levels depends on factors beyond our control,
including unforeseen increases or decreases in demand for our products and
production and supply difficulties. Demand for our products can be affected by
product introductions or price changes by competitors or by us, the life cycle
of our products, or delays in the development or manufacturing of our products.
Our operating results and ability to increase the market share of our products
may be adversely affected if we are unable to address inventory issues on a
timely basis.

RISKS RELATING TO OWNING OUR COMMON STOCK:

Our officers, directors and principal stockholders own approximately 58% of
the outstanding shares of common stock, allowing these stockholders to control
matters requiring approval of the stockholders.

As a result of such ownership our officers, directors and principal
stockholders, other investors will have limited control over matters requiring
approval by the stockholders, including the election of directors. Such
concentrated control may also make it difficult for the stockholders to receive
a premium for their shares of our common stock in the event we enter into
transactions that require stockholder approval. In addition, certain provisions
of Delaware law could have the effect of making it more difficult or more
expensive for a third party to acquire, or of discouraging a third party from
attempting to acquire control of us.

Exercise of warrants and options will dilute existing stockholders and
could decrease the market price of our common stock.

As of May 24, 2002, we had issued and outstanding 10,099,880 shares of
common stock and outstanding warrants and options to purchase 2,341,312
additional shares of common stock. The existence of the remaining warrants and
options may adversely affect the market price of our common stock and the terms
under which we obtain additional equity capital.

Our ability to raise additional capital through the sale of our securities
may be harmed by competing resales of our common stock by our stockholders.

The price of our common stock could fall if stockholders sell substantial
amounts of our common stock. Such sales could make it more difficult for us to
sell securities at the time and price we deem appropriate. To the extent
stockholders, including the selling stockholders, offer and sell their shares of
common stock to investors for less than the price offered by us, our attempt to
sell our securities may be adversely affected as a result of the concurrent
offering by selling stockholders. Investors may negotiate prices lower than the
price we are offering our shares of common stock with selling stockholders.
Furthermore, potential investors may not be interested in purchasing shares of
our common stock on any terms if stockholders sell substantial amounts of our
common stock.

Effectiveness of our registration statement on Form SB-2 will dilute
existing stockholders and could decrease the market price of our common stock.

Once our registration statement is declared effective, selling stockholders
will be able to sell up to approximately 4 million shares of our common stock
and we will be able to sell the equivalent of up to 7 million shares of our
common stock. The sale of common stock and warrants covered by the registration
statement by us or selling stockholders will dilute existing stockholders and
may adversely affect the market price of our common stock.

Our common stock is listed on the Over-The-Counter Bulletin Board, which
may make it more difficult for stockholders to sell their shares and may cause
the market price of our common stock to decrease, and there is no public market
for our warrants.

Because our common stock is listed on the Over-The-Counter (OTC) Bulletin
Board, the liquidity of our common stock is impaired, not only in the number of
shares that are bought and sold, but also through delays in the timing of
transactions, and limited coverage by security analysts and the news media, if
any, of us. As a result, prices for shares of our common stock may be lower than
might otherwise prevail if our common stock was traded on NASDAQ or a national
securities exchange, like the American Stock Exchange. In addition, there is no
public or other market for our warrants exercisable into shares of our common
stock, and we do not intend to apply, and are not obligated to apply, for
listing of the warrants on any securities exchange or automated quotation
system.

We may make changes to the terms of the warrants.

The warrant agreement provides that we and the warrant agent may make
changes to the warrant agreement with the consent of the warrantholders
representing not less than two-thirds of the warrants then outstanding. As a
result, warrantholders' interests may be negatively affected by a two-thirds
vote of warrantholders consenting to any changes proposed by us and the warrant
agent.

The warrants may not be sold unless we have a current prospectus covering
the shares of common stock issuable upon exercise of the warrants.

The warrants are not exercisable unless, at the time of the exercise, we
have a current prospectus covering the shares of common stock issuable upon
exercise of the warrants, and such shares have been registered, qualified or
deemed to be exempt under the securities or "blue sky" laws of the state of
residence of the exercising holder of the warrants. Although we will use our
best efforts to have all the shares of common stock issuable upon exercise of
the warrants registered or qualified on or before the exercise date and to
maintain a current prospectus relating thereto until the expiration of the
warrants, there can be no assurance that we will be able to do so.

Our stock price may be volatile and an investment in our common stock could
suffer a decline in value.

The market price of our common stock may fluctuate significantly in
response to a number of factors, some of which are beyond our control. These
factors include:

o progress of our products through development and marketing;

o announcements of technological innovations or new products by us or
our competitors;

o government regulatory action affecting our products or competitors'
products in both the United States and foreign countries;

o developments or disputes concerning patent or proprietary rights;

o actual or anticipated fluctuations in our operating results;

o the loss of key management or technical personnel;

o the loss of major customers or suppliers;

o the outcome of any future litigation;

o changes in our financial estimates by securities analysts;

o fluctuations in currency exchange rates;

o general market conditions for emerging growth and technology
companies;

o broad market fluctuations;

o recovery from natural disasters; and

o economic conditions in the United States or abroad.

Our charter documents and Delaware Law may have the effect of making it
more expensive or more difficult for a third party to acquire, or to acquire
control, of us.

Our certificate of incorporation makes it possible for our Board of
Directors to issue preferred stock with voting or other rights that could impede
the success of any attempt to change control of us. Our certificate of
incorporation and bylaws eliminate cumulative voting which may make it more
difficult for a minority shareholder to gain a seat on our Board of Directors
and to influence Board of Directors' decision regarding a takeover. Delaware Law
prohibits a publicly held Delaware corporation from engaging in certain business
combinations with certain persons, who acquire our securities with the intent of
engaging in a business combination, unless the proposed transaction is approved
in a prescribed manner. This provision has the effect of discouraging
transactions not approved by our Board of Directors as required by the statute
which may discourage third parties from attempting to acquire us or to acquire
control of us even if the attempt would result in a premium over market price
for the shares of common stock held by our stockholders.

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

The information referred to above should be considered by investors when
reviewing any forward-looking statements contained in this report, in any of our
public filings or press releases or in any oral statements made by us or any of
our officers or other persons acting on our behalf. The important factors that
could affect forward-looking statements are subject to change, and we disclaim
any obligation or duty to update or modify these forward-looking statements.

USE OF PROCEEDS

We estimate that the net proceeds from the sale of 3,500,000 Units offered by us
at an assumed price of $2.00 per Unit, after deducting the approximate offering
expenses of $290,000, will be $6,710,000 (assuming we sell all the Units),
excluding any proceeds from warrants included in the Units offered by us or by
the selling stockholders. In the event that common stock is sold in place of
Units, our net proceeds will increase by $2.8 million and the additional
proceeds will be used for general corporate purposes, including working capital.

The selling stockholders will receive all of the proceeds from selling their
shares. We will not receive any sales proceeds. Some of the shares to be sold
are already owned by the selling stockholders, and the remainder are issuable to
them upon exercise of warrants. See "Selling Stockholders." We will only receive
proceeds upon the exercise of these warrants. The total amount we will receive
if all of the warrants held by the selling stockholders were exercised is
approximately $1,922,514 (assuming that such selling stockholders do not utilize
a cashless exercise). We have not made any plans for the use of these proceeds
other than to add them to working capital.

The table below represents our best estimate of the allocation of the net
proceeds of the sale of the Units, including the priorities for the use of the
proceeds in descending order, based upon our current business plan and current
economic and industry conditions and is subject to reapportionment among the
categories listed below in response to changes in our plans, regulations,
industry conditions and future revenue and expenditures. The amount and timing
of expenditures will vary depending on a number of factors, including changes in
our contemplated operations or business plan and changes in economic or industry
conditions.

Accounts payable and corporate expenses, including expenses of the offering $1,000,000
Repay affiliate borrowings(1) $1,000,000
To retire debt(2) $ 375,000
Other general corporate purposes, including working capital $4,335,000
----------
Total $6,710,000

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

(1) On March 14, 2002, we entered into a loan for $500,000 with a 1 year term,
maturing March 14, 2003, with Dr. Sueling Wang, our president and a
director. The interest rate is 12%, principal and interest is due at
maturity, the loan is unsecured and the proceeds were used to pay a vendor
for inventory that we purchased. We anticipate borrowing up to another
$500,000 from Dr. Wang on like terms.

(2) On November 30, 2002, we entered into a loan for $500,000 with a 5 year
term, secured by specific manufacturing equipment, maturing November 30,
2004, with General Electric Capital Corporation for the purchase of toner
manufacturing equipment. The interest rate is 10.214% and the monthly
principal and interest payments are $10,676.39.

Pending application of the proceeds of our offering, we intend to temporarily
reduce our revolving line of credit with our bank and otherwise invest the net
proceeds in certificates of deposit, money market accounts, United States
Government obligations or other short-term interest bearing obligations of
investment grade.

We believe that the net proceeds of our offering will be sufficient to meet our
needs and certain planned operating and investing activities in the next twelve
months. See "Risk Factors."

CAPITALIZATION

The following table sets forth our capitalization as of March 31, 2002, and
as adjusted to give effect to the sale by us of all of the Units offered by us
at the public offering price of $2.00 per Unit and the sale of all of the shares
of common stock, and the receipt of the estimated net proceeds therefrom. The
table should be read in conjunction with the financial statements and notes
thereto appearing elsewhere in this prospectus.

ACTUAL AS ADJUSTED(1) AS ADJUSTED (2)
------------------ ------------------ ----------------
Total current liabilities: $ 7,962,116 $ 7,962,116 $ 7,962,116
Long-term debt: 4,728,899 4,728,899 4,728,899
Stockholders' equity: common stock par value $.01,
20,000,000 shares authorized; 10,099,175 outstanding: 100,999
13,599,175 shares outstanding as adjusted (1); 135,999
17,099,175 shares outstanding as adjusted (2); 170,992
Additional paid-in capital 9,873,283 16,543,283 19,308,283
Accumulated deficit (2,102,187) (2,102,187) (2,102,187)
Total Stockholders' Equity 7,867,095 14,577,095 17,377,095
Total Liability and Stockholders' Equity $ 20,558,110 $ 27,268,110 $ 30,068,110

(1) Assumes the sale of 3,500,000 Units at $2.00 per Unit, without the exercise
of any of the warrants in connection therewith by the respective holders,
less offering expenses of $290,000. Also excludes the proceeds that we may
receive as a result of the exercise of warrants held by the selling
stockholders.
(2) Assumes the sale of 7,000,000 shares at $1.40 per share, less offering
expenses of $290,000. Also excludes the proceeds that may be received as a
result of the exercise of warrants held by the selling stockholders.

THE COMPANY

OVERVIEW

ColorImaging, Inc., formerly known as Advatex Associates, Inc., was incorporated
in Delaware in 1987. On May 16, 2000, Advatex, Logical Acquisition Corp., Color
Acquisition Corp., Logical Imaging Solutions, Inc. and Color Image, Inc. entered
into a Merger Agreement and Plan of Reorganization pursuant to which Logical
Acquisition Corp. merged with and into Logical and Color Acquisition Corp.
merged with and into Color Image. Pursuant to the Merger Agreement, shareholders
of Logical and Color Image exchanged their shares for shares of common stock of
Advatex. Logical shareholders converted their shares into shares of common stock
of Advatex at the ratio of 1.84843 shares of common stock of Advatex for each
one share of Logical. Color Image shareholders converted their shares into
shares of common stock of Advatex at the ratio of 15 shares of common stock of
Advatex for each one share of Color Image. Following the conversion of shares by
Logical and Color Image shareholders, shareholders of Logical and Color Image
owned approximately 85% of the outstanding shares of common stock of Advatex and
shareholders of Advatex before the merger owned approximately 15% and Logical
and Color Image became wholly-owned subsidiaries of Advatex.

On July 7, 2000, pursuant to a vote of our stockholders, we changed our name to
Color Imaging, Inc. On December 31, 2000, Color Image, Inc. was merged with and
into Color Imaging, Inc.

We develop, manufacture and market products used in electronic printing, analog
and digital copiers and high-speed digital printing. These high-speed digital
printing systems print in real-time directly on offset presses. Offset presses
are presses that utilize plates and ink to print on paper and other materials.
We conduct our business through two separate operating units, Color and Logical.
Color develops, purchases from others and markets electronic printing products,
including black text, color, magnetic character recognition and specialty
toners, and provides other parts and accessories for laser printers and analog
and digital copiers. Logical designs, manufactures and integrates its
proprietary software and hardware with components made by third parties into a
complete printing system and offers technical support and supplies in connection
therewith. Logical's printing system allows commercial printers to digitally
process and print data and images that may change from page to page, also known
as variable data, at high speeds directly on commercial offset web presses. This
capability saves time and money for both the printer and its customer.

COLOR

Since 1989, Color has developed, manufactured and marketed products used in
electronic printing and photocopying. Color formulates and produces black text
and specialty toners, including color and magnetic character recognition toners
for numerous laser printers and a number of facsimile machines and photocopiers.
Color's toners permit the printing of a wide range of user-selected colors and
also the full process color printing of cyan, yellow, magenta and black.
Magnetic character recognition toners enable the printing of magnetic characters
that are required for the high-speed processing of checks and other financial
documents. Color also supplies other consumable products used in electronic
printing and photocopying, including toner cartridges, cartridge components,
photoreceptors and imaging drums.

LOGICAL

Logical designs, assembles and markets a complete printing system, SOLUTION2000,
to commercial printers. When installed directly on an offset printing press, the
SOLUTION2000 expands printing capabilities to include the printing of variable
data and images, including bar codes, magnetic character recognition and
unlimited alphanumeric sequencing. These functions allow commercial printers to
digitally process and print variable data at extremely high speeds where
previously they were able to only print fixed images from printing plates or
cylinders installed on their offset printing presses. Since its founding in
1993, Logical's development efforts have focused on creating a high-speed
digital variable data printing system for commercial printing applications that
combines software, hardware and consumable products. Logical also offers a full
line of consumable products, including toners, print cartridges and toner fusing
assemblies. Logical's strategy is to continually build an installed base of
printer systems that will generate a recurring demand for these consumable
products.

Logical is developing the DigitalColorPress, a Solution Series of printing
systems incorporating color printing capabilities. The DigitalColorPress can
print variable data in color at rates exceeding 250 pages-per-minute. This is in
contrast to other products that do not print directly on the press and print at
speeds of approximately 85 pages per minute. Logical believes that this
represents an attractive alternative for high-speed offset printing applications
because it reduces steps and labor in the print process. Logical intends to
market the DigitalColorPress color printing system during 2002 as an enhancement
to existing Solution series installations and as an upgrade for other printing
systems.

MARKET OVERVIEW

Color's market for imaging products is the installed base of electronic printing
devices: laser printers and facsimile machines and analog and digital copiers.
Color competes within this market with products supplied by the OEM
manufacturers and with other suppliers of aftermarket imaging products.
Additional products in this category include enhancement products that extend
the capabilities of the OEM's product, such as magnetic character recognition
toners that enable the printing of magnetic characters on checks and other
financial documents. We market our products worldwide and regionally primarily
to distributors of imaging products who sell to dealers and large end-users. To
a lesser extent, we sell to remanufacturers and a few dealers directly.

Commercial offset presses print fixed data from printing plates that are
prepared prior to the printing process. Every printed item or page in typical
offset printing is a replication of the same page many times. Offset printing is
further characterized by printing using inks that are transferred from plates to
paper with print rates at times exceeding 500 pages per minute. Offset printed
products include; newspapers, books, stationary, forms, brochures, advertising
materials, etc. Data processing printers, on the other hand, print variable
data, primarily black text, which can produce an unlimited stream of variable
data or images at typical print rates up to 150 pages per minute.

Logical's market for printing systems, upgrades and consumable products is our
installed base of Solution series printing systems. Each of these systems
represents an opportunity to upgrade to a DigitalColorPress, and represents a
continued and expanding revenue source for Logical's evolving line of consumable
products. Logical's long-term objective is to provide an upgrade option for
offset commercial presses that replaces the conventional printing plate and
inking processes with a computer controlled pre-press and on-press production
color printing capability.

STRATEGY

Our operating strategy is to expand, including through strategic acquisition(s),
our printer and copier products business, while diversifying our business by
pursuing innovative electron beam imaging technologies and products for sale to
the commercial press market. We intend to expand our printer and copier business
by increasing the capacity of our toner manufacturing facility and utilize it,
increasingly, for higher margin specialty, magnetic character recognition,
copier and color toners and by expanding our sources for products from strategic
suppliers that we can add value to or resell that complement our product lines.
The objective of our pursuit of innovative technologies and products applicable
to the commercial offset press market is to become a manufacturer of our own
proprietary high-speed digital press, printing in color, and a related line of
consumable products to add to sales and operating profitability while reducing
our reliance on the printer and copier consumable product markets.

The key elements of our imaging products strategy include expanding toner
product offerings, increasing vertical integration by supplying complete toner
and cartridge devices, capitalizing on the expertise of producing specialty
toners, exploiting the efficiencies associated with the investment made in new
manufacturing facilities and expanding into new geographic markets, and
broadening our sales channels.

Color's development of new toner products is focused on providing an aftermarket
product for electronic printing devices that achieves a high level of market
acceptance. Color endeavors to offer equivalent toner products with equal or
better quality at lower prices than the OEM's toner product.

Color is committed to increasing the value added of its toner products to the
end user by providing not only the toners but also the toner cartridge or
canister that is compatible with the OEM's equipment. Color believes that by
developing toner cartridge and canister devices for specific electronic printing
or copying machines, and integrating those devices with compatible toners, the
market for Color's toner products will expand. Color believes that this approach
will also result in increased gross margins.

Color will continue to emphasize its high margin specialty toner capability,
primarily color and magnetic character recognition toners, while providing lower
margin black text toners in commodity bulk to a number of large customers. The
bulk quantity of black text toners are required to maximize the efficiencies of
Color's manufacturing plant and justify the capital investment in the production
equipment. The availability of this complete manufacturing process and equipment
allows for the continued expansion of specialty toner products.

Logical's strategy is to provide a continuing series of software, hardware and
consumable products for the existing base of commercial printers employing
electron beam imaging printing on their offset presses. This product strategy
envisions the installation of the DigitalColorPress on those offset presses to
produce digital color printing at press speeds and the elimination of many
conventional pre-press functions. Logical intends to continue to place
production printing equipment in service thereby creating a market for its
consumable products.

RECENT DEVELOPMENTS

We have commenced the relocation and consolidation of most of Logical's
operations and research and development activities from Santa Ana, California,
to our headquarters in Norcross, GA, leaving certain field support activities in
California. This move to our headquarters is intended to achieve additional
efficiencies, and we expect to complete the relocation and consolidation during
2002.

During March 2002, we rescinded two transactions for the sale of our common
stock and warrants to purchase additional shares of our common stock totaling
1,025,000 and 525,000, respectively. The purchasers paid the par value in cash
for the shares issued to them, and the balance of the purchase price consisted
of recourse promissory notes. The sale of 1,000,000 shares of our common stock
and warrants to purchase an additional 500,000 shares of common stock was, per
agreement, subject to our registering the securities for resale. However, the
SEC staff took the position that these securities could not be registered for
resale in this registration statement and the transaction was rescinded, the
shares, warrant and promissory note were cancelled and we retained the $10,000
and accrued interest earned thereon in consideration of our expenses incurred in
connection with the transaction. The second transaction for 25,000 shares of our
common stock and warrants to purchase an additional 25,000 shares of our common
stock was rescinded when the parties believed the promissory note would not be
paid by the time this registration statement became effective. The shares,
warrant and promissory note were cancelled and the cash consideration was
refunded the purchaser.

With the rescission of the two above-mentioned sales of our common stock
totaling $2,050,000, we anticipate that we will need to raise additional funds
from other sources to meet operating requirements and to fund other planned
activities. We intend to meet our operating requirements by borrowing from
affiliates. Certain other planned activities are dependent upon either increased
borrowings from our affiliates, borrowings from others or our raising funds
through the sale of our securities.

Color anticipates the completion of the remainder of its factory expansion
during the second quarter of 2002. Color believes that the doubling of capacity
during 2002 will, with increased sales of manufactured products, increase
manufacturing efficiencies, reduce cost of sales, and increase competitiveness.

On May 14, 2002, the U.S. Patent and Trademark Office issued our patent for our
print cartridge designed for digital printing using electron beam imaging
technologies.

PRODUCTS

NET REVENUES FOR THE
-------------------------------------------
THREE MONTHS ENDED TWELVE MONTHS ENDED
PRODUCT FAMILY MARCH 31, 2002 DECEMBER 31, 2001 PRIMARY PRODUCT FUNCTION
---------------------- ------------------- ---------------------- -----------------------------------

Toner $ 6,674,927 $ 27,069,751 Data-processing, financial
document printing and copying

Laser printer $ 986,396 $ 2,900,017 Laser printer cartridge
kits & parts remanufacturing

Commercial printing $ 197,755 $ 551,399 Electron beam imaging consumable
products and services products and technical support
services

PRODUCT FAMILY PRODUCTS OR SERVICES
---------------------- -------------------------------------

Toner Aftermarket black text, color,
specialty and magnetic character
recognition toners in bulk, bottles
and cartridges

Laser printer Remanufactured cartridges and
kits & parts printer parts for remanufacturing
OEM print cartridges

Commercial printing Printing systems, toner, print
products and services cartridges, erase rods and system
support services

MARKETING AND DISTRIBUTION

We market and distribute our products worldwide through our direct sales force.
Color's products are marketed primarily to distributors, OEMs and rechargers,
while Logical's products are marketed directly to commercial printers.

In the three months ended March 31, 2002 and the twelve months ended December
31, 2001, our sales were primarily generated from the sale of black text, color
and magnetic character recognition toners and related consumable products,
including toner cartridges and the re-filling of certain toner cartridges. For
the three and twelve month periods ended March 31, 2002 and December 31, 2001,
our two largest imaging products customers accounted for 47% and 21% and 41% and
16% of net sales, respectively. During the three months ended March 31, 2002,
there were no sales to our third largest customer of 2001 who accounted for 12%
of 2001 net sales, since these sales were made directly to our largest customer
during 2002. Though our sales are on purchase orders, these customers typically
issue purchase orders three months in advance of the product delivery date and
provide us with an additional two month rolling forecast. While future orders
may vary from the forecasts by as much as 20%, it has been our experience that
the orders generally coincide with the customer's forecast.

COMPETITION

The markets for our products are competitive and subject to rapid changes in
technology. Color in particular competes principally on the basis of quality,
flexibility and service, and as a full-service provider with a pricing strategy
that reflects quality and reliability.

Color's competitors in the toner market include large businesses with
significantly greater resources in the high-volume commodity toner market, as
well as smaller companies in the specialty, color and magnetic character toner
markets. In addition, other companies offer remanufactured toner cartridges and
printer parts that are lower priced.

Color's strategy requires that it continue to develop and market new and
innovative products at competitive prices. New product announcements by Color's
principal competitors, however, can have, and in the past have had, a material
adverse effect on our financial results. Such new product announcements can
quickly undermine any technological competitive edge that one manufacturer may
enjoy over another and set new market standards for quality, speed and function.
Furthermore, knowledge in the marketplace about pending new product
announcements by Color's competitors may also have a material adverse effect on
us inasmuch as purchasers of these products may defer purchasing decisions until
the announcement and subsequent testing of such new products.

In recent years, Color and its principal competitors which have significantly
greater financial, marketing and technological resources than Color, have
regularly lowered prices on both printer and copier imaging supplies and are
expected to continue to do so in the future. Color is vulnerable to these
pricing pressures which, if not mitigated by cost and expense reductions, may
result in lower profitability and could jeopardize Color's ability to grow or
maintain market share. We expect that, as we compete more successfully with our
larger competitors, our increased market presence may attract more frequent
challenges, both legal and commercial, from our competitors, including claims of
possible intellectual property infringement.

Canon(TM), Xerox(TM) and Ricoh(TM) are the market leaders in the toner market
whose aggregate sales Color believes represent approximately 75% to 85% of
worldwide toner sales. As with our other products, if pricing pressures are not
mitigated by cost and expense reductions, Color's ability to maintain or build
market share and profitability could be adversely affected.

Like certain of Color's competitors, Color is a supplier of laser printer kits
and parts. Color cannot assure you that Color will be able to compete
effectively for a share of this business. In addition, Color cannot assure you
that Color's competitors will not develop new compatible laser printer products
that may perform better or sell for less than Color's products. Independent
manufacturers compete for the aftermarket business under either their own brand,
private label, or both, using price, aggressive marketing programs, and flexible
terms and conditions to attract customers. Depending on the product, prices for
compatible products produced by other manufacturers are offered below Color's
prices, in some cases significantly below Color's prices.

Logical's commercial printing products and services have few direct competitors
due to the specialization of these products. Logical's indirect competitors
offer alternative products that use other printing technologies such as inkjet
or xerography with different speed and print resolution capabilities. Unlike
xerography, electron beam imaging prints on the offset press and at higher
speeds than xerography. Electron beam imaging also requires less system
maintenance than an inkjet system. Delphax Printing Systems, a wholly owned
subsidiary of Check Technology Corporation who acquired Delphax from Xerox
Corporation in December 2001, is a supplier of electron beam imaging print
engines to Logical and others, but to Logical's knowledge does not market a
system to commercial printers for on-press applications. Delphax, considered the
leader in electron beam imaging technology, has been supplying systems to the
data processing market for over twenty years, and does not, to Logical's
knowledge, supply software or systems capable of printing in color. Check
Technology Corporation, who recently changed its name to Delphax Technologies,
Inc., a supplier of check printing equipment, does not, to Logical's knowledge,
offer software or systems capable of printing in color or any other on-press
application. However, in view of this sale, Delphax could become a direct
competitor of Logical or could stop supplying its products to Logical.

We believe that the synergy between Color and Logical with respect to printing
systems and proprietary consumable products will enhance both operations as our
consumable supply side grows with printing system sales.

MANUFACTURING

We operate a toner manufacturing facility in Norcross, Georgia that we moved
into during 1999 and 2000. We have made significant capital investment in this
facility to increase production capacity and improve manufacturing efficiencies
to lower our processing costs of our toner products. The installation and
successful testing of additional equipment is to be completed by the second
quarter 2002 and is an integral part of our plan to further increase production
capacity, improve efficiency and to significantly lower the costs of our toner
products. Our goal for the last three years has been to reduce average toner
product costs by one-half, in response to management's assessment of the
continuing price reductions for these products in the marketplace.

Logical's electron beam imaging, Solution Series and DigitalColorPress printer
system hardware and software design, development and support organization, is
located in Santa Ana, California. Except for certain technical support
activities it is being relocated to our headquarters in Norcross, GA. Logical's
strategy has been to integrate proprietary software and hardware with components
available from third parties into a complete high speed digital printing system
for use by commercial printers.

MATERIALS

We procure a wide variety of components for use in our manufacturing processes,
including raw materials, such as chemicals and resins, electro-mechanical
components and assemblies. Although many of these components are standard off-
the-shelf parts that are available from multiple sources, we often utilize
preferred supplier relationships to ensure more consistent quality, cost and
delivery. Often Color's toner formulations are dependent on one or more
materials produced by only one vendor, since the formula was developed based on
that material's unique characteristics. Alternative materials exist, but the
differences in performance characteristics could require Color to modify the
original formula and/or its manufacturing processes to obtain a marketable
product based on the new material. Further, some components are only available
from one supplier, including certain custom chemicals, application specific
integrated circuits and other semiconductors. In addition, we source some print
engines and other finished products from OEMs. Should these components not be
available from any one of these suppliers, there can be no assurance that
production of certain of our products would not be disrupted. In the event that
these components are not available to us, our production could be disrupted.
Such a disruption could materially harm our business.

RESEARCH AND DEVELOPMENT

Our research and development activities for the past several years have focused
on black text, specialty, color and magnetic character toner formulations, and
the development of electron beam imaging technologies and supplies. Our
commitment to increasing revenues through new product introductions requires
research and development expenditures, innovative designs, significant
development and testing activities and functional solutions.

For the three months ended March 31, 2002, our research and development
expenditures increased $45,500, or 21%, from $216,900 for the three months ended
March 31, 2001. Our research and development expenditures for the twelve months
ended December 31, 2001, increased $119,000, or 16%, to $883,000 in 2001 from
$764,000 in 2000. It is necessary to make strategic decisions from time to time
as to which technologies will produce products with the greatest future
potential. Occasionally, a customer will ask Color to develop toner products for
their exclusive resale, and in that event the customer will generally
financially support Color's development activities. In turn, Color will also
occasionally work with suppliers to develop proprietary technology for Color's
exclusive use. These strategic relationships have benefited us in the past, and
we intend to continue to pursue such relationships for new products. Our
software, electrical and mechanical engineers, chemists and consultants are
focused on development of printing systems and consumables that will increase
efficiency, lower production costs or improve the quality of Logical's electron
beam imaging commercial printing products. With certain products, we may elect
to purchase key components from third party suppliers, such as electron beam
imaging print engines or related parts and consumables for electron beam imaging
technology until Logical has sufficient proprietary products of its own. We
cannot predict whether we can continue to develop the technologically advanced
products required to remain competitive or that such products will achieve
market acceptance.

INTELLECTUAL PROPERTY

We seek to protect technology, inventions and improvements that we consider
important through the use of trade secrets and in some cases patents. We
currently hold U.S. patent number 5,834,150 issued on November 10, 1998 and
expiring in July 2014. This patent covers toners for Logical's high speed
printing system and certain other toner fusing methods. We were also just
granted U.S. patent number 6,386,684, Curved Print Head for Charged Particle
Generation, which we believe is an improved print head for digital high-speed
printing or image generation. Additionally, we are preparing another patent
application in connection with our high speed non-magnetic color toning system.
To date we have not generated any revenue from these patents. There can be no
assurance that our patents and technologies will provide competitive advantages
for our products, or that such rights will not be challenged or circumvented by
competitors. In addition, there can be no assurance that any patents covered
under any patent applications that may be made will be issued. Claims made under
patent applications may be denied or significantly narrowed and the issued
patents, if any, may not provide significant commercial protection to us. We
could incur substantial costs in proceedings before the U.S. Patent and
Trademark Office, including interference proceedings. These proceedings could
result in adverse decisions as to the priority of our inventions.

While we do not believe that any of our products infringe any valid claims of
patents or other proprietary rights held by third parties, there can be no
assurance that these products do not infringe any patents or other proprietary
rights held by third parties. If an infringement claim were made, the costs
incurred to defend the claim could be substantial and adversely affect us, even
if we were ultimately successful in defending the claim. If our products were
found to infringe any proprietary right of a third party, we could be required
to pay significant damages or license fees to the third party or cease
production. Litigation may also be necessary to enforce patent rights held by
us, or to protect trade secrets or techniques owned by us. Any such claims or
litigation could result in substantial costs and diversion of effort by
management.

While we seek to protect our electron beam imaging technology, we have not
pursued patent protection for other technology because the benefit of doing so
is out weighed by the cost. Specifically, we believe patent protection is of
limited usefulness in areas other than electron beam imaging technology because
competitors have the ability (even if we had a patent) to develop substantially
equivalent technology. Therefore, we rely on trade secrets and other unpatented
proprietary technology. There can be no assurance that we can meaningfully
protect our rights in such unpatented proprietary technology or that others will
not independently develop substantially equivalent proprietary products or
processes or otherwise gain access to our proprietary technology. We also seek
to protect our trade secrets and proprietary know-how, in part, with
confidentiality agreements with employees and consultants. There can be no
assurance that the agreements will not be breached, that we will have adequate
remedies for any breach or that our trade secrets will not otherwise become
known to or independently developed by competitors.

EMPLOYEES

As of March 31, 2002, we had eighty-eight (88) employees, including two (2)
employees on leave of absence and one (1) part-time employee. At December 31,
2001, we had ninety-two (92) employees, including one (1) part-time employee,
while at December 31, 2000, we had one hundred six (106) employees, including
one (1) part-time employee. None of our employees is represented by a labor
union or is covered by a collective bargaining agreement. We have not
experienced any work stoppages and consider our relations with employees to be
good.

ENVIRONMENTAL AND REGULATORY MATTERS

Color's toner supplies manufacturing operations are subject to laws and
regulations, relating to environmental matters that impose limitations on the
discharge of pollutants into the air, water and soil and establish standards for
the treatment, storage and disposal of solid and hazardous wastes. In this
regard, Color is required to have a permit in order to conduct various aspects
of its business. The Air Protection Branch of the State of Georgia's Department
of Natural Resources Environmental Protection Division issued a permit to Color
in 2000 to construct and operate a copier and printer toner manufacturing
facility at our headquarters. The permit is conditioned upon compliance by us
with all the provisions of the Georgia Air Quality Act, and specifically the
Rules, Chapter 391-3-1, in effect. In addition to operating and maintaining the
equipment, in a manner consistent with good air pollution control practice to
minimize emissions, we must maintain records, conduct tests, and comply with
certain allowable emissions and operational limitations. The permit is subject
to revocation, suspension, modification or amendment for cause, including
evidence of our noncompliance. Compliance with these laws and regulations in the
past has not had a material adverse effect on our capital expenditures, earnings
or competitive position. There can be no assurance, however, that future changes
in environmental laws or regulations, or in the criteria required to obtain or
maintain necessary permits, will not have a material adverse effect on us.

FACILITIES

We currently lease a facility of approximately 180,000 square feet in Norcross,
Georgia from an affiliated party. This facility serves as our executive
headquarters and houses our toner manufacturing facilities, as well as our
research and development and sales and marketing departments. The lease for this
facility expires in March of 2009 and includes three options at our election to
extend the term for five years each. We also lease an approximately 4,000 square
foot facility in Santa Ana, California under a lease that expired in October
2001. Currently the Santa Ana facility lease is month-to-month, and we
anticipate vacating these premises by the third quarter of 2002 and
consolidating these operations at our headquarters. Management considers these
facilities to be sufficient for our current operations.

LEGAL PROCEEDINGS

We are not a party to any material legal proceedings.

MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS

Our Common Stock is traded on the Over the Counter Bulletin Board (the OTC
Bulletin Board) under the symbol CIMG. Prior to July 7, 2000, the Common Stock
was traded on the OTC Bulletin Board under the symbol ADTX. The following table
sets forth the high and low prices of the Common Stock for the quarters
indicated as quoted on the OTC Bulletin Board.

2000 2001 2002
---------------------------- -------------------------- --------------------------------

HIGH LOW HIGH LOW HIGH LOW
------------ ---------- ---------- ---------- ----------- ---------------

First Quarter.......... 2.2792 1.2344 3.0000 2.5000 3.3500 2.1000

Second Quarter......... 5.6980 1.3298 2.6500 1.9000 2.5600(1) 1.6500(1)

Third Quarter.......... 6.2500 2.0000 2.7500 1.9000

Fourth Quarter......... 5.1250 2.0000 4.3000 2.0000

____________________

(1) Through May 23, 2002.

The above quotations represent prices, adjusted for stock splits, between
dealers without adjustments for retail markups, markdowns or commissions and may
not represent actual transactions.

As of April 1, 2002, there were approximately 348 holders of record of our
common stock.

We do not anticipate paying cash dividends on our common stock in the
foreseeable future. We currently intend to retain future earnings to finance our
operations and fund the growth of its business. Any payment of future dividends
will be at the discretion of our Board of Directors and will depend upon, among
other things, our earnings, financial condition, capital requirements, level of
indebtedness, contractual restrictions with respect to the payment of dividends
and other factors that our Board of Directors deems relevant.

MANAGEMENT'S DISCUSSION AND ANALYSIS

OVERVIEW

On June 28, 2000, Color Imaging, Inc. (Color), formerly known as Advatex
Associates, Inc. (Advatex) merged with Logical Imaging Solutions, Inc. (Logical)
and Color Image, Inc. (Image) and Logical and Image became wholly-owned
subsidiaries of Advatex. The Company previously accounted for the merger as a
pooling-of-interests and has since revised its accounting treatment for the
merger to the purchase method. The financial information contained in this
report is in conformity with the purchase method of accounting, and the
historical financial statements are those of Logical. The assets, liabilities
and operating results of Image are only included in the consolidated financial
statements of the Company from the date of acquisition, June 28, 2000, or for
only the last six months of the year ended December 31, 2000 and for the full
year ended December 31, 2001. At December 31, 2000, Image was merged with and
into Color.

Net sales are primarily generated from the sale of Color's black text, color and
magnetic character recognition toners and related consumable products, including
toner cartridges and the re-filling of certain toner cartridges. We do not have
a written or oral contract with our customers, and all sales are made through
purchase orders. Consistent with the purchase orders and forecasts provided to
us by our major customers, we provide our major suppliers with purchase orders
three months in advance and an additional rolling forecast for two months. We
communicate regularly and meet at least twice annually with our major customers
and suppliers to assess developments in the industry and changes in the business
expected from our customers to maintain an efficient supply chain. In April
2001, we changed our purchasing arrangement with our largest supplier to FOB
origination from FOB destination, and we adjusted our pricing to reflect the
change to costs.

Our net sales were $7.9 million for the three months ended March 31, 2002, an
increase of 44% compared to $5.5 million for the three months ended March 31,
2001. In the three months ended March 31, 2002, a distributor of imaging
supplies, our largest customer, accounted for approximately 47% of net sales. Of
the $7.9 million in net sales for the three months ended March 31, 2002, $5.1
million were attributable to copier products of Color. The revenue increase from
copier products to $5.1 million from 2002 to 2001 was $1.9 million, or 59%. We
believe that sales of laser printing products will increase in future periods as
a result of our factory expansion to be completed in the second quarter of 2002.
We further believe that completion of these tasks, with the resulting added
capacity and increased production, will increase manufacturing efficiencies and
competitiveness and reduce cost of sales. Net sales made outside of the United
States increased to 34% of total sales for the three months ended March 31,
2002, compared to 9% for the comparable period last year. This increase in
international sales resulted primarily from the increase in sales to our two
largest customers.

Our net sales were $30.5 million for the year ended December 31, 2001, or an
increase of 152% compared to $12.1 million for the year ended December 31, 2000.
Of the $30.5 million in net sales, $30.0 million were attributable to laser
printer and copier products of Color. The remainder, $0.5 million of sales was
generated by Logical's sales of high speed printing systems related consumable
products. The revenue increase from copier products from $7.3 million to $20.7
million from 2000 to 2001 was $13.4 million, or 184%. Had the entire year of
Image's operations been included in the year 2000, the copier product sales for
2000 would have been $12.1 million and the increase only $8.6 million or 71%. In
the year ended December 31, 2001, a distributor of imaging supplies accounted
for approximately 41% of net sales. Sales to this customer consist primarily of
analog copier products, and as the result are expected to decline over time
unless these declining sales to this customer are offset by the sale of digital
copier products.

Logical's sales of printing systems and related software and consumable products
for the three months ended March 31, 2002 and the year that ended on December
31, 2001 represented 2.5 percent and 2 percent of our net revenues,
respectively.

ACCOUNTING PRINCIPLES

Revenue from product sales is recognized when persuasive evidence of an
arrangement exists, delivery has occurred, the fee is fixed or determinable and
collectibility is probable. At this time the earnings process is complete and
the risks and rewards of ownership have transferred to the customer, which is
generally when the goods are shipped and all of our significant obligations have
been satisfied.

Cost of goods sold includes direct material and labor, warranty expenses,
license fees and manufacturing and service overhead. Inventories are stated at
the lower of cost (first-in, first-out) or market. Equipment is depreciated
using the straight-line method over the estimated useful lives of the equipment.
Improvements to leased property are amortized over the lesser of the life of the
lease or the life of the improvements.

Selling, general and administrative expenses include marketing and customer
support staff, other marketing expenses, management and administrative personnel
costs, professional services, legal and accounting fees and administrative
operating costs. Selling, general and administrative costs are expensed when the
costs are incurred.

Deferred charges include fees and costs related to the activities associated
with the planned acquisition of business assets that we have determined have a
future economic benefit. These expenditures are then capitalized into the cost
of the assets upon acquisition. Management reviews these assets when the
circumstances and situations change such that there is an indication that the
carrying amount is not recoverable. When management's best estimate of the
future economic benefit of these assets is less than the carrying amount, the
carrying amount is reduced to the fair value and a write- off is recognized.

Research and development expenses include costs associated with the development
of new products and significant enhancements of existing products, and consist
primarily of employee salaries, benefits, consulting expenses and depreciation
of laboratory equipment. With the exception of certain patented products that
are coming to market, all research and development costs are expensed as they
are incurred.

CRITICAL ACCOUNTING POLICIES

Our financial statements are prepared in accordance with accounting
principles generally accepted in the United States, which require management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements, the disclosure of
contingent assets and liabilities, and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates. We believe the following critical accounting policies affect our more
significant estimates and assumptions used in the preparation of our financial
statements. Our significant estimates and assumptions are reviewed and any
required adjustments are recorded on a quarterly basis.

Carrying Value of Electron Beam Imaging Test Equipment. As of March 31,
2002 the net book value of our investment in electron beam imaging test
equipment was approximately $1.4 million. We have estimated the useful life of
this equipment to be ten years. The equipment is new technology and is used by
us to support our selling, manufacturing and research and development activities
in connection with Logical's DigitalColorPress. To date, however, we have not
fully commercialized the DigitalColorPress, and the future benefit that we would
derive from this equipment is dependent upon our successfully commercializing
this technology and our products remaining competitive for at least the length
of time we have estimated its useful life. Should we not be successful in fully
commercializing the related DigitalColorPress products or realizing the
sufficient levels of sales from such products, the equipment could become
partially or fully impaired.

Lower of Cost or Market for Inventory. Our inventories are recorded at the
lower of standard cost or market. As with any manufacturer or wholesaler,
economic conditions, cyclical customer demand, product introductions or pricing
changes of our competitors and changes in purchasing or distribution can affect
the carrying value of inventory. As circumstances warrant, we record lower of
cost or market inventory adjustments. In some instances these adjustments can
have a material effect on the financial results of an annual or interim period.
In order to determine such adjustments, we evaluate the age, inventory turns,
estimated fair value and, in the case of toner products, whether or not they can
be reformulated and manufactured into other products, and record any adjustment
if estimated fair value is below cost. Through periodic review of each of our
inventory categories and by offering markdown or closeout pricing, we regularly
take steps to sell off slower moving inventory to eliminate or lessen the effect
of any lower of cost or market adjustment.

Carrying Value of Toner Manufacturing Equipment. We are nearing the
completion of the latest expansion of our toner manufacturing facility. We have
approximately $7.5 million invested in the equipment and leaseholds, with a
carrying value of $6 million, in connection with toner manufacturing that have
estimated lives of up to twenty years. Should competing technologies or offshore
competitors cause our manufacturing technology to be non-competitive, the
estimated life of these assets may need to be shortened and their carrying value
could be materially affected.

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, selected
information derived from the Company's twelve month audited and interim
unaudited consolidated statements of operations and expressed as a percentage of
net sales. All periods reflect the operating results of Logical, while the
operating results of Image are only included from after the date of the merger,
June 28, 2000.

Twelve Months Ended Three Months Ended
December 31, March 31,
---------------------------------- ---------------------------
2001 2000 1999 2002 2001
-------- ---------- --------- ------------- ---------

Net sales 100 100 100 100 100
Cost of goods sold 85 85 66 84 82
Gross Profit 15 15 34 16 18
Administrative expense 6 7 73 6 8
Deferred charge write-off 1 0 0 0 0
Research and development 3 6 73 3 4
Sales and marketing 4 4 0 4 4
Operating income 1 -2 -112 3 2
Interest and bond expense 1 2 3 1 2
Depreciation and amortization 2 3 1 2 3
Income before taxes 0 -8 -113 2 0
Provision for taxes (credit) 0 -3 -45 1 0

Net income (loss) 0 -5 -68 1 0

THREE MONTHS ENDED MARCH 31, 2002 COMPARED TO THREE MONTHS ENDED MARCH 31, 2001

Net Sales. Our net sales were $7.9 million for the three months ended March 31,
2002, an increase of 44% compared to $5.5 million for the three months ended
March 31, 2001. Of the $7.9 million in net sales, $5.1 million were attributable
to copier products of Color. The revenue increase from copier products to $5.1
million from 2002 to 2001 was $1.9 million, or 59%. We believe that sales of
laser printing products will increase in future periods as a result of our
factory expansion which is scheduled to be completed in the second quarter of
2002. We further believe that completion of these tasks, with the resulting
added capacity and increased production, will increase manufacturing
efficiencies and competitiveness and reduce cost of sales. Net sales made
outside of the United States increased to 34% of total sales for the three
months ended March 31, 2002, compared to 9% for the comparable period last year.
This increase in international sales resulted primarily from the increase in
sales to our two largest customers.

Cost of Goods Sold. Cost of goods sold increased by $2.1 million or 47% to $6.6
million in the three months ended March 31, 2002 from $4.5 million for the three
months ended March 31, 2001. This increase was primarily due to increased net
sales. Cost of goods sold as a percentage of net sales increased by 2 percentage
points from 82% for the three months ended March 31, 2001 to 84% for the three
months ended March 31, 2002. This increase reflected the increase in certain
copier product sales at lower margins.

Gross Profit. As a result of the above factors, gross profit increased to $1.3
million in the three months ended March 31, 2002 from $1.0 million in the three
months ended March 31, 2001. Gross profit as a percentage of net sales, however,
decreased by 2 percentage points from 18% to 16% for the three months ended
March 31, 2002, as compared to the corresponding period of the prior year.
During 2002, with the completion of the factory expansion and expected increased
in sales, management believes that both the gross profit dollars and percentage
will improve over 2001.

Operating Expenses. Operating expenses increased $101,000 or 11% to $999,700 in
the three months ended March 31, 2002 from $898,800 in the three months ended
March 31, 2001. General and administrative, selling and R&D expenses decreased,
as a percentage of net sales, to 13% in the three months ended March 31, 2002
from 16% in the three months ended March 31, 2001. General and administrative
expenses were approximately the same at $460,000 for the three months ended
March 31, 2002 and 2001. Selling expenses increased by $50,700, or 22%, in the
three months ended March 31, 2002 compared to the three months ended March 31,
2001. Selling expenses increased primarily as the result of the increased
marketing costs associated with the increased revenues from copier products.
Research and development expenses increased by $45,500, or 21%, to $262,400 in
the three months ended March 31, 2002. Research and development expenses as a
percentage of net sales decreased to 3% in the three months March 31, 2002, from
4% in the three months ended March 31, 2001, reflecting the higher sales level.

Operating Income. As a result of the above factors, operating income increased
by $154,800, to a profit of $270,000 in the three months ended March 31, 2002
from $115,200 in the three months ended March 31, 2001.

Interest and Finance Expense. Interest expense decreased by $39,900 in the three
months ended March 31, 2002 from the three months ended March 31, 2001. The
decrease was primarily the result of lower interest rates and secondarily the
result of reduced interest bearing debt levels.

Other Income. Other income decreased by $1,000 from income of $8,000 to income
of $7,000 in the three months ended March 31, 2002 from the three months ended
March 31, 2001.

Income Taxes. As the result of our increased profit in the current year, income
tax provisions were $80,000 for the three months ended March 31, 2002 compared
to a tax credit of $2,000 for the three months ended March 31, 2001.

YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2000

Net Sales. Our net sales were $30.5 million for the year ended December 31,
2001, or an increase of 152% compared to $12.1 million for the year ended
December 31, 2000. Of the $30.5 million in net sales, $30.0 million were
attributable to laser printer and copier products of Color. The remainder, $0.5
million of sales was generated by Logical's sales of high speed printing systems
related consumable products. The revenue increase from copier products from $7.3
million to $20.7 million from 2000 to 2001 was $13.4 million, or 184%. Had the
entire year of Image's operations been included in the year 2000, the copier
product sales for 2000 would have been $12.1 million and the increase only $8.6
million or 71%. We believe that sales of laser printing products will increase
in future periods as a result of our factory expansion to be completed in the
second quarter of 2002. We further believe that completion of these tasks, with
the resulting added capacity and increased production, will increase
manufacturing efficiencies and competitiveness and reduce cost of sales.

Cost of Goods Sold. Cost of goods sold increased by $15.7 million or 152% to
$26.0 million in the year ended December 31, 2001 from $10.3 million in the year
ended December 31, 2000. Had Image's entire year 2000 been included, cost of
goods sold would have increased by $8.1 million or 45%. This increase was
primarily due to increased net sales. Cost of goods sold as a percentage of net
sales remained at 85% in the year ended December 31, 2001.

Gross Profit. As a result of the above factors, gross profit increased to $4.5
million in the year ended December 31, 2001 from $1.8 million in the year ended
December 31, 2000. Gross profit as a percentage of net sales, however, in the
year ended December 31, 2001 remained the same as December 31, 2000 at 15%.
During 2002, with the completion of the factory expansion, management believes
that both the gross profit dollars and percentage will improve over that
achieved in 2001.

Operating Expenses. Operating expenses increased $1,869,000 or 88% to $3,994,000
in the year ended December 31, 2001 from $2,125,000 in the year ended December
31, 2000. Had the entire year of Image's been included in the year 2000, these
expenses would have increased approximately 16%. Notwithstanding the deferred
charge write-off, general and administrative, selling and R&D expenses
decreased, as a percentage of net sales, to 13% in the year 2001 from 17% in the
year ended December 31, 2000. General and administrative expenses increased by
$809,000, or 91%, primarily as the result of only reflecting Image's expenses
for the last half of the year 2000. Had Image's expenses been included for the
entire year 2000, the increase would have been 15%, and that increase was
largely due to increased professional fees and payroll as the result of the
expanded operations of the Company. Selling expenses increased by $725,000, or
154%, in the year ended December 31, 2001 compared to the year ended December
31, 2000. Had Image's selling expenses been included for the entire year 2000,
the increase would have been $315,000, or 36%, in the year ended December 31,
2001 compared to the year ended December 31, 2000. Selling expenses increased
primarily as the result of the increased marketing costs associated with the
increased revenues from copier products. Research and development expenses
increased by $119,000, or 16%, to $883,000 in the year ended December 31, 2001.
Research and development expenses as a percentage of net sales decreased to 3%
in the year 2001, from 6% in the year 2000, reflecting the higher sales level.
Research and development expenses, particularly in connection with toner
formulation and manufacturing process development, are expected to increase
further during 2002.

Deferred Charge Write-Off. An expense of $215,000 was recorded in the year ended
December 31, 2001, for expenditures related to activities in connection with an
acquisition of a manufacturing business that was not consummated. $53,000 of
this expense was incurred during the year ended December 31, 2000 and $162,000
during the year ended December 31, 2001.

Operating Income. As a result of the above factors the operating income
increased by $820,000, to a profit of $474,000 in the year ended December 31,
2001 from a loss of $346,000 in the year ended December 31, 2000.

Interest and Finance Expense. Interest expense increased by $176,000 in the year
ended December 31, 2001 from the year ended December 31, 2000. Had Image's
interest expense for the entire year 2000 been included in interest and finance
expenses, these expenses would have actually decreased $72,000 in the year ended
December 31, 2001 from $489,000 in the year ended December 31, 2000.The decrease
on a full year basis was primarily the result of lower interest rates and
secondarily the result of reduced interest bearing debt levels.

Other Income. Other income increased by $434,000 from expenses of $404,000 to
income of $30,000 in the year ended December 31, 2001 from the year ended
December 31, 2000. This increase was primarily due to not having the expenses in
2001 for the relocation of the Company's manufacturing facilities and disposal
of equipment that was experienced during 2000.

Income Taxes. As the result of the Company's increased profit in the current
year, income tax provisions were $37,000 for the year ended December 31, 2001
compared to a tax credit of $333,000 for the year ended December 31, 2000.

LIQUIDITY AND CAPITAL RESOURCES

At March 31, 2002, our working capital was approximately $2.7 million and our
current ratio was 1.34 to 1. At the year ended December 31, 2001, working
capital was approximately $2.6 million and our current ratio was 1.35 to 1.

Cash flows provided by operating activities were $38,000 in the three months
ended March 31, 2002 compared to $252,000 in the three months ended March 31,
2001. The cash flows provided by operating activities in the three months ended
March 31, 2002 decreased primarily from carrying higher levels of accounts
receivable and our reducing payables and accrued liabilities during 2002. While
accounts and other receivables increased by $456,000, reflecting our growth in
net sales, in the three months ended March 31, 2002, this use of cash flow was
partially offset by a reduction of inventory for the same period of $241,000. We
have improved our inventory turnover beyond that which is reflected in the
inventory balances. As the result of changing to purchasing from our largest
vendor at terms of freight on board at origination, we have some $700,000 of
inventory in transit at March 31, 2002. While, on the other hand, we had no
inventory in transit at March 31, 2001. Had we not changed the terms of our
purchasing from our largest vendor, our inventory at March 31, 2002 would have
been approximately $5.1 million compared to $6.1 million at March 31, 2001, or a
reduction to inventory of $1 million, or 16%, while net sales increased 44%.

Cash flows used in investing activities were $300,000 in the three months ended
March 31, 2002, compared to $328,000 in the three months ended March 31, 2001.
Included in cash flows used in investing activities in the three months ended
March 31, 2002, was $296,000 in capital expenditures in connection with the
completion of our factory expansion.

We have a $2.5 million revolving line of credit with our bank that has an
outstanding balance as of March 31, 2002 of $1,432,000. At the end of each
month, for the following month, we have an interest rate option of either the
one-month LIBOR interest rate in effect two business days before the first day
of the month plus 2.50% or our bank's prime interest rate minus 0.25%. As of
March 31, 2002, the interest rate was the one-month Libor rate of 2.25% plus
2.50% (6.87%). This revolving line of credit has a June 30, 2002 expiration
date, and we expect to renew this revolving line of credit for an additional
year on or about June 30, 2002.

Under the line of credit, we are permitted to borrow up to 85% of eligible
accounts receivable and 50 percent of eligible inventories (up to a maximum of
$1.1 million and not to exceed 60 percent of the total outstanding). We have
granted our bank a security interest in all of our assets as security for the
repayment of the lines of credit.

The Bank agreement contains various covenants which the Company is required to
maintain. As of March 31, 2002, the Company was in compliance with those
covenants.

Cash flow provided by financing activities for the three months ended March 31,
2002 was $552,000, resulting primarily from the $500,000 loan we received from
an officer. Had we not received the loan, cash flows provided by financing
activities at March 31, 2002 would have been $52,000 compared to cash flows
utilized in financing activities of $95,000 for the three months ended March 31,
2001.

Funds generated from operating activities and availability under credit
facilities are expected to be insufficient to finance our plans to expand
operating activities for the remainder of 2002. Having rescinded two
transactions during March 2002 for the sale of our securities totaling
$2,050,000, we anticipate that we will need to raise an additional $500,000 from
other sources to fund these activities. To meet these requirements we intend to
seek financing from our affiliates and engage in sales of our securities. We
have received our bank's consent to borrow up to $1.4 million from affiliates.
We borrowed $500,000 during the first quarter 2002 from an officer to meet
vendor commitments for products. We intend to repay this borrowing from future
sales of our common stock. Notwithstanding our success in obtaining financing in
the amount of $500,000, funds on hand will be insufficient to meet our planned
need for an additional $500,000, consisting of $500,000 to vendors for products.
Should we not obtain these additional funds, certain operational activities
would be either reduced or curtailed entirely to meet our existing commitments
and a $250,000 principal payment due on our industrial development bond on July
1, 2002. We intend to fund these planned activities by either borrowing the
additional funds from affiliates or selling our securities. There can be no
assurance that additional financing will be available on favorable terms or that
the proceeds from the sale of our securities will be available to meet these
planned operating and financing activities. We believe that these operating and
investing activities, if successfully completed, will increase revenues and
operating margins.

DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

Our directors and executive officers are as specified on the following table:

NAME AGE POSITION
------------------------------------ ------------ ---------------------------------------------------------------

Michael W. Brennan 59 Chief Executive Officer and Chairman of the Board
Sueling Wang, PhD 49 President, Chief Operating Officer and Vice Chairman
Morris E. Van Asperen 58 Executive Vice President, Chief Financial Officer and Director
Charles R. Allison 69 Vice President, Sales and Marketing, and Director
Edwin C. St. Amour 60 Director
Robert L. Langsam 56 Director
Jui-Chi Jerry Wang 46 Director
Jui-Kung Wang 59 Director
Jui-Hung Wang 55 Director
Victor A. Hollander, CPA 69 Director

Michael W. Brennan became Chairman of the Board and Chief Executive Officer
of Color Imaging, Inc. in June 2000, when Logical Imaging Solutions, Inc.
(Logical) became a wholly owned subsidiary of Color. From 1997 to 2000, he
served as a director and President of Logical. From 1991 to 1995 he served as
President of Interscience Computer Corporation (Interscience). Mr. Brennan has a
B.S. degree in electrical engineering from the University of Southern
California, an M.B.A. degree from Pepperdine University, is a Fellow of the
Institute of Directors (London, England) and an adjunct faculty member of the
University of Phoenix. He has over twenty years of experience within the
computer industry and participated in the founding of four companies that became
publicly held corporations; three in the U.S. (Computer Automation, Datum, Inc.
and Interscience) and one on the London International Stock Exchange (Optim
PLC). Mr. Brennan has developed many successful products within the computer
industry and holds patents on processes that are widely used in high-speed
printing.

Sueling Wang, PhD., became President, Chief Operating Officer and
Vice-Chairman of Color in June 2000. From 1989 to 2000, he served as President
and director of Color Image, Inc. which was merged with Color. Dr. Wang was also
a founder of Color Image Inc. In 1998, Dr. Wang was a founding member of Kings
Brothers LLC, which leases space to Color used for our headquarters and
manufacturing facilities in Norcross, Georgia. Dr. Wang received a M.S. degree
from the University of Windsor, in Ontario, Canada and a PhD degree from the
University of Detroit. Dr. Wang's expertise in resin synthesis brought him into
the toner industry and led to the formation of Color Image, Inc. in 1989.

Morris E. Van Asperen has served as Executive Vice President, Chief
Financial Officer and director of Color since June 2000 and Secretary since June
2001. Since 1998, he has served as director of Logical. From 1986 to 2000, he
was employed by National Bank of California in various positions most recently
as Executive Vice President and Credit Administrator. Mr. Van Asperen also has
extensive experience as a financial and management consultant to businesses of
up to $50 million in revenues and 1,000 employees in construction, household
goods, industrial glass, and electronics manufacturing and software development.
From 1977 to 1984, he served as Vice President & Chief Financial Officer of ATE
Associates, Inc., a supplier of test fixtures and software for numerous military
aircraft programs. Mr. Van Asperen received a B.S. degree in Mathematics from
the University of Oklahoma and an M.B.A. degree from Pepperdine University.

Charles R. Allison has served as Vice President, Marketing and Sales and
director of Color since June 2000. From 1992 to 2000, he served as Vice
President of Marketing and Sales of Color Image, Inc., which was merged with and
into Color. From 1982 to 1991, he served as Vice President of Sales and
Marketing, and general manager, at Synfax Manufacturing, Inc., an early
developer of consumable products for EBI-based printing technologies. Mr.
Allison has held other senior positions in the printing/imaging industry,
including positions with Minolta Corporation, Litton Business Systems and Royal
McBee.

Edwin C. St. Amour has served as a director of Color since June 2000. In
2001, he founded Golf Car Trader, Inc. and serves as its President. He is
Chairman of American Computer Hardware Corporation having founded the company in
1979. Mr. St. Amour began developing and marketing Electron Beam Imaging (EBI)
related products in the 1980's. He founded Logical in 1993 to develop EBI
compatible hardware and software products and adapt this technology to produce
plug-and-play products for form manufacturers. He served as Logical's' President
from 1993 until 1997 and Chairman from 1993 until June 2000 when it became a
subsidiary of Color. Mr. St. Amour entered the printing industry in the early
sixties and began marketing forms and documents for Moore Business Forms and
Standard Register Corp.

Robert L. Langsam has served as a director of Color since June 2000. In
1980, he founded Diversified Financial Management (DFM), a financial planning
services organization, and has served as its President since then. From 1975 to
1979, he was Assistant Corporate Controller for MCI Communications and was

responsible for the operational accounting controls and systems, as well as
extensive involvement in product pricing and filings. From 1970 to 1975, Mr.
Langsam was Chief Financial Officer of the copier products division of SCM. Mr.
Langsam holds a B.S. degree in Marketing/Accounting from Pace University and
double MBA degrees in Finance and Taxation from Adelphi and St. John's
Universities.

Jui-Chi Wang has served as a director of Color since June 2000. From 1994
until 2000, he served as a director of Color Image, Inc., which was merged with
Color. Since 1984, Mr. Wang has served as President of General Plastic
Industrial Co. Ltd (GPI), a Taiwan-based plastics manufacturer specializing in
injection moldings and more particularly toner cartridges and accessories for
copiers and laser printers. In 1998, Mr. Wang was a founding member of Kings
Brothers LLC, which leases space to Color used for our headquarters and
manufacturing facilities in Norcross, Georgia. Mr. Wang received a Master's
Degree in Computer Engineering from the University of Southern California.

Jui-Hung Wang has served as a director of Color since June 2001. He was a
founder and director of Color Image, Inc. until its merger with Color. He is a
founder and serves as Chairman of General Plastic Industrial Co., Ltd, a leading
Taiwan based manufacturer of after market injection molded cartridges and
accessories for copiers and laser printers. Since January 2001, Mr. Wang has
served as a director of Taiwan Yu-Tzu Company, a food company. In 1998, Mr. Wang
was a founding member of Kings Brothers LLC, which leases space to Color used
for our headquarters and manufacturing facilities in Norcross, Georgia. From
1986 to 1994, Mr. Wang was governor of Wu-Chi Town, Taiwan.

Jui-Kung Wang has served as a director of Color since September 2001. He
was a founder of Color Image, Inc. in 1989 and its Chairman until its merger
with Color. He is a co-founder and has served as a director of General Plastic
Industrial Co., Ltd, a leading Taiwan based manufacturer of after market
injection molded cartridges and accessories for copiers and laser printers since
1978. In 1998 Mr. Wang was a founding member of Kings Brothers LLC, which leases
space to Color we use for our headquarters and manufacturing facilities in
Norcross, Georgia. Mr. Wang has been a professor of management with Tung-Hai
University, Taiwan for over 20 years. He has received a bachelor's degree in
economics, and MBA and PhD degrees in management.

Victor A. Hollander, CPA, has served as a director of Color since March
2001. Mr. Hollander has been licensed to practice public accounting in
California as a certified public accountant since 1958. Since February 2001, Mr.
Hollander has been the manager of the securities group at Good Swartz Brown &
Berns LLP, a Los Angeles - based accounting firm. From 1978 to 2001, he was a
partner in the accounting firm he founded Hollander, Lumer & Co. LLP. Mr.
Hollander has been involved with over twenty initial and secondary public
offerings since 1990. Mr. Hollander has served on various Los Angeles Chapter,
California Society of Certified Public Accounts and American Institute of
Certified Public Accountants securities, ethics, accounting and auditing
committees. He specializes in securities and merger and acquisition matters.

EXECUTIVE COMPENSATION

The following Summary Compensation Table sets forth the compensation earned by
our Chief Executive Officer and the three other most highly compensated
executive officers who were serving as such as of December 31, 2001 and December
31, 2000 (collectively, the Named Executive Officers), whose aggregate
compensation for fiscal years 2001 and 2000 exceeded $100,000 for services
rendered in all capacities to Color and its subsidiaries for that fiscal year.

SUMMARY COMPENSATION TABLE
-------------------------------------------------------------------------------------------
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------- -------------------------
SECURITIES
UNDERLYING ALL OTHER
NAME YEAR SALARY OPTIONS(#) COMPENSATION (1)
-------------------------------- -------- -------------------- ------------------------- -------------------------

Michael W. Brennan 2001 $151,442 150,000 (5) $ 6,403
Chief Executive Officer 2000 $146,485 --- $ 25,591 (2)

Dr. Sueling Wang 2001 $158,423 100,000 (5) $ 22,313 (3)
President & 2000 $149,159 200,000 (6) $ 18,887 (3)
Chief Operating Officer

Morris E. Van Asperen 2001 $146,714 100,000 (5) $ 5,461
Executive Vice President 2000 $ 54,294 200,000 (7) $ --
Chief Financial Officer &
Secretary

Charles R. Allison 2001 $106,379 50,000 (5) $ 28,145 (4)
Vice President, Sales 2000 $101,996 50,000 (8) $ 25,902 (4)

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

(1) For named executive officers the amount reported represents the cost of
group insurance benefits, Color's matching contribution to the 401(k) plan
for the officer and other life insurance policies maintained for him, as
further described in the notes for each officer, respectively.
(2) The split dollar life insurance policy is no longer in force. Premiums paid
during 2000 were $15,584.
(3) The split dollar life insurance premiums were $13,526 and $16,505 during
2001 and 2000, respectively. Pursuant to the policies Color will, upon his
death or earlier liquidation of each such policy, be entitled to the refund
of all premium payments made by Color on the policies, and the balance of
the proceeds will be paid to Mr. Wang's designated beneficiaries.
(4) The life insurance premiums paid by Color in 2001 and 2000 were $21,977 and
$22,476, respectively. Color owns and is the beneficiary of this policy and
maintains it to fund the deferred compensation agreement with Mr. Allison.
Upon Mr. Allison's retirement, he, or his beneficiaries, are to receive 120
monthly payments of $2,500 per month or, as provided, the net present value
of any unpaid amounts.
(5) Options granted by action of the board of directors on March 21, 2001. 25%
vest upon grant and the balance vest 25% per year upon each anniversary of
the date of grant. The options expire five years after their respective
vesting date(s).
(6) The options were granted as part of the officer's employment agreement on
June 28, 2000. 100,000 vested immediately and the remainder vested ratably
over the next two years upon the anniversary date of the grant.
(7) The options were granted as part of the officer's employment agreement on
June 28, 2000. 100,000 vested immediately and the remainder vested ratably
over the next four years upon the anniversary date of the grant. Mr. Van
Asperen joined Color as Executive Vice President in August 2001.
(8) The options were granted as part of the officer's employment agreement on
June 28, 2000. 25,000 vested immediately and the remainder vested ratably
over the next two years upon the anniversary date of the grant.

OPTION GRANTS TABLE

The following table sets forth certain information regarding options
granted to the Named Executive Officers during the year ended December 31, 2001.
No stock appreciation rights were granted during 2001.

STOCK OPTION GRANTS IN LAST FISCAL YEAR

NUMBER OF PERCENT OF
SECURITIES TOTAL
UNDERLYING OPTIONS EXERCISE
OPTIONS GRANTED TO OR BASE
GRANTED EMPLOYEE PRICE EXPIRATION
Name (#)(1) IN 2001 ($/SH) DATE
---------------------------- ----------------- ----------------------- ----------------------- --------------------------

Michael W. Brennan 37,500 28% $ 2.75 3/21/06
37,500 3/21/07
37,500 3/21/08
37,500 3/21/09
-----------------
150,000

Sueling Wang 25,000 19% $ 2.75 3/21/06
25,000 3/21/07
25,000 3/21/08
25,000 3/21/09
-----------------
100,000

Morris E. Van Asperen 25,000 19% $ 2.75 3/21/06
25,000 3/21/07
25,000 3/21/08
25,000 3/21/09
-----------------
100,000

Charles R. Allison 12,500 9% $ 2.75 3/21/06
12,500 3/21/07
12,500 3/21/08
12,500 3/21/09
-----------------
50,000

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

(1) The above options were granted on March 21, 2001, become fully vested after
three years and expire five years, respectively, from the vesting date(s).

OPTION EXERCISES AND YEAR-END VALUE TABLE

None of the Named Executive Officers exercised stock options during 2001.
The following table sets forth certain information regarding unexercised options
held at year-end by each of the Named Executive Officers.

AGGREGATED OPTION EXERCISES IN 2001 AND OPTION VALUES AT DECEMBER 31, 2001

NUMBER OF SECURITIES
UNDERLYING UNEXERCISED
OPTIONS
--------------------------------------------------
SHARES
ACQUIRED VALUE
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE
------------------------- ------------------ --------------- --------------------- -----------------------

Michael W. Brennan 0 0 37,500 112,500

Sueling Wang 0 0 175,000 125,000

Morris E. Van Asperen 0 0 150,000 150,000

Charles R. Allison 0 0 50,000 50,000

AGGREGATED OPTION EXERCISES IN 2001 AND OPTION VALUES AT DECEMBER 31, 2001

VALUE OF UNEXERCISED
IN-THE-MONEY
OPTIONS ($)(1)
-------------------------------------------------

NAME EXERCISABLE UNEXERCISABLE
------------------------- ----------------------- ----------------------

Michael W. Brennan 13,125 39,375

Sueling Wang 173,750 81,250

Morris E. Van Asperen 146,250 108,750

Charles R. Allison 45,625 26,875

-----------

(1) Based on the closing price of our common stock of $3.10 on December 28,
2001.

EMPLOYMENT AGREEMENTS

On June 28, 2000, we entered into employment agreements with Michael W. Brennan,
Dr. Sueling Wang, Morris E. Van Asperen, and Charles R. Allison. Each of these
employment agreements has a 5 year term. We are obligated to pay Mr. Brennan and
Dr. Wang annual salaries of $150,000 each with a guaranteed increase of 5% per
annum over the term of the agreements. We are obligated to pay Mr. Van Asperen
an annual salary of $144,000 with a guaranteed increase of 5% per annum over the
term of his agreement. In addition to commissions earned under our sales
incentive program, we are obligated to pay Mr. Allison an annual salary of
$89,250 with a guaranteed increase of 5% per annum over the term of his
agreement. Each employee may terminate the agreement upon 6 months notice to us.
We may terminate each employee upon 6 months notice, provided, however, that we
are obligated to pay to the employee his annual base salary, commissions or
bonuses earned, and benefits for a period of 12 months after the date of such
notice.

The employment agreements with the above named officers also commit us to
purchasing for their benefit certain life insurance plans. For the year ended
December 31, 2001, we did not have in place for either Mr. Brennan or Mr. Van
Asperen such supplemental life insurance plans. We are the owners of as well as
the beneficiary of a life insurance policy on Mr. Allison and we maintain it to
fund the deferred compensation agreement with Mr. Allison. Upon Mr. Allison's
retirement, he, or his beneficiaries, are to receive 120 monthly payments of
$2,000 per month or, as provided, the net present value of any unpaid amounts.
The life insurance premiums paid by us to fund Mr. Allison's deferred
compensation agreement in 2001 and 2000 were $21,977 and $11,238, respectively.
We pay the premiums and we are the collateral assignee of four split dollar life
insurance policies owned by Dr. Wang. Pursuant to the policies we will, upon his
death or earlier liquidation of each such policy, be entitled to the refund of
all premium payments made by us on the policies, and the balance of the proceeds
will be paid to Mr. Wang's designated beneficiaries. The split dollar life
insurance premiums were $13,526 and $8,253 during 2001 and 2000, respectively.
The monies due from Dr. Wang in connection with these life insurance policies at
the years ended December 31, 2001 and 2000 was $112,103 and $98,578,
respectively.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information known to Color with respect to
the beneficial ownership of Color's common stock as of May 24, 2002 by:

o each stockholder known by Color to own beneficially more than 5% of
Color's common stock;

o each Named Executive Officer;

o each of Color's directors; and

o all directors and executive officers as a group.

Except as otherwise indicated in the footnotes, Color believes that the
beneficial owners of the common stock listed below, have sole voting power and
investment power with respect to such shares of common stock indicated. In
computing the number of shares beneficially owned by a person and the percent
ownership of that person, shares of common stock subject to options or warrants
held by that person that are currently exercisable or will become exercisable
within 60 days of the date of this prospectus are deemed outstanding, while such
shares are not deemed outstanding for purposes of computing percent ownership of
any other person.

PERCENTAGE OF
NAME OF BENEFICIAL OWNER NO. OF SHARES OWNERSHIP(1)
----------------------------------------- ------------------------ ---------------------------

Michael W. Brennan (2) 999,215 9.8%
Sueling Wang (3) 1,956,551 18.9%
Morris E. Van Asperen (4) 310,906 3.0%
Charles R. Allison (5) 75,000 *
Edwin St. Amour (6) 989,768 9.8%
Robert L. Langsam (7) 143,632 1.5%
Jui-Chi Wang (8) 689,450 6.8%
Jui-Hung Wang 699,178 6.9%
Jui-Kung Wang 316,209 3.1%
Victor A. Hollander (9) 105,000 1.0%
Executive officers and directors
as a group (10 persons) (10) 6,289,909 58.0%
----------------
* Less than 1%

(1) Percentage of ownership is calculated as required by Commission Rule
13d-3(d)(1). The table above includes the number of shares underlying
options and warrants which are exercisable within 60 days after the date of
this proxy statement.
(2) Includes 75,000 shares subject to options that are currently exercisable.
(3) Includes: (a) 600,000 shares owned by Sueling Wang's four children, (b)
141,204 shares owned by Yik-Li Sih, Sueling Wang's wife, in which Dr. Wang
may be deemed to have pecuniary interest. Dr. Wang disclaims beneficial
ownership of such 201,204 shares. Also includes 250,000 shares subject to
options that are currently exercisable.
(4) Includes 200,000 shares subject to options that are currently exercisable.
(5) Includes 75,000 shares subject to options that are currently exercisable.
(6) Edwin St. Amour holds 979,768 shares as co-trustee (Mr. St. Amour's wife
Annette is the other co-trustee) of the St. Amour Revocable Trust. Also
includes 10,000 shares subject to options that are currently exercisable.
(7) Includes 10,000 shares subject to options and 55,453 shares underlying
warrants that are currently exercisable.
(8) Includes 10,000 subject to options that are currently exercisable.
(9) Includes 5,000 options and 50,000 shares underlying warrants that are
currently exercisable.
(10) Includes 635,000 shares subject to options and 105,453 shares underlying
warrants that are exercisable within 60 days after the date of this
prospectus.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Directors, Jui-Hung Wang, Jui-Kung Wang, Sueling Wang and Jui-Chi Wang, own
Kings Brothers, LLC, the landlord from which we lease our Norcross, Georgia
plant. For the three months ended March 31, 2002, we paid Kings Brothers LLC
$129,621 in lease payments. For the years ended December 31, 2001 and 2000, the
lease payments for the plant were $505,836 and $186,427, respectively. The lease
was made on April 1, 1999 and expires in April 2009.

On November 19, 2001, we borrowed $200,000 on an unsecured basis from Kings
Brothers LLC. The revolving loan bears interest at the rate of 9% per annum,
matures on November 18, 2002 and is evidenced in writing. We paid the principal
and interest outstanding on December 10, 2001, paying $790.38 in total interest
to Kings Brothers. We borrowed this amount for general corporate purposes,
including working capital. On March 20, 2002 the revolving loan arrangement was
cancelled.

We also had a short-term unsecured loan, due July 26, 2000, evidenced in
writing from Kings Brothers of $240,000 with interest at 8%, paying $5,576 of
interest for the year. As of December 31, 2000, all amounts outstanding under
the loan were repaid. We used the proceeds of this loan for working capital.

On June 1, 1999, the Development Authority of Gwinnett County, Georgia
issued $4,100,000 of industrial development revenue bonds on behalf of us and
Kings Brothers LLC. Pursuant to a certain joint debtor agreement we are jointly
and severally liable with Kings Brothers to pay the amounts borrowed under the
bond. The 3.5% revenue bonds are payable in varying annual principal and monthly
interest payments through July 2019. The bonds are collateralized by all of our
assets and the real property leased by us and owned by Kings Brothers. The
majority of the proceeds $3,125,872 from the bond issue were used by us to
relocate our manufacturing plant, make leasehold improvements at the new
facility and to purchase certain manufacturing equipment. The remaining proceeds
$974,128 were used by Kings Brothers to pay down the mortgage on its real
property, some of which is leased to us. The proceeds used by Kings Brothers
have been recorded as a receivable on our financial statements. We entered into
a Joint Debtor Agreement with Kings Brothers LLC concerning their rights, duties
and obligations in connection with the bonds. Kings Brothers and we,
collectively, are obligated to repay any outstanding debt under the bonds.
Amounts receivable from Kings Brothers are secured by a lien on all of Kings
Brothers' real estate, including the part we lease from them, and by personal
guarantees by the members of Kings Brothers. No principal payments were due for
the three months ended March 31, 2002, while interest due and paid by Kings
Brothers for the three months ended March 31, 2002 was $3,470. Principal due and
paid by Kings Brothers to us during the years ending December 31, 2001 and 2002
was $76,032 and $0, respectively. Interest due and paid by Kings Brothers to us
during the years ending December 31, 2001 and 2000 was $30,368 and $22,255,
respectively. As of March 31, 2002, the principal outstanding was $3,780,000 and
the portion due to us from Kings Brothers was $898,096.

Directors Jui-Hung Wang, Jui-Kung Wang, Jui-Chi Wang, are owners in and
Chairman, Auditor and President, respectively, of General Plastic Industrial
Co., LTD (GPI), a Taiwanese manufacturer of injection molded cartridges and
accessories for copiers and laser printers. GPI also owned and operated GPI-USA,
Inc. (GPI-USA) a wholly-owned United States distributor of GPI's products. For
the three months ended March 31, 2002, we purchased $433,679 of injected molded
products from GPI. In 2001, we purchased $4,005,508 of copier and laser printer
products from GPI for resale. In 2000, we purchased from GPI and GPI-USA
$268,966 and $166,526, respectively, of copier and laser printer products.

Directors, Jui-Hung Wang, Jui-Kung Wang, Sueling Wang and Jui-Chi J. Wang,
collectively have beneficial ownership interests of 32.6% in AccuRec, LLC, a
distributor of digital versatile disks. From time to time during the year ending
December 31, 2000, we had short-term unsecured loans evidenced in writing and
due on demand issued to AccuRec aggregating $1,850,000 and a maximum outstanding
at any one time of $500,000. The interest rate on these loans was 8%, and we
paid a total of $6,244 in interest during 2000. As of December 31, 2000 all
amounts outstanding under such loans were repaid. We used the proceeds from
these loans for working capital purposes.

Director, Sueling Wang, as trustee for two of his children, loaned us a
total of $252,000 from 1998 to 1999 at an interest rate of 12% with principal
and interest due at expiry. Each of the loans was paid in full during July 2000,
and we paid interest in the aggregate amount of $47,205 on these loans. We used
the proceeds of this loan for working capital purposes.

On March 14, 2002, we borrowed $500,000 from director, Sueling Wang, on an
unsecured basis. The loan bears interest at the rate of 12% per annum, matures
on March 14, 2003 and is evidenced in writing. We borrowed this amount to meet a
supplier commitment for product. As of March 31, 2002, interest accrued and
unpaid on the note was $2,795, and $500,000 was the outstanding principal
balance. We anticipate borrowing up to another $500,000 from Dr. Wang on like
terms.

Directors Jui-Chi Wang and Jui-Hung Wang purchased 350,000 and 50,000 Units
(each Unit consisted of one share of common stock and a warrant to purchase one
share of common stock at an exercise price of $2.00 per share) for $700,000 and
$100,000, including promissory notes, respectively. Jui-Chi Wang's $700,000

recourse promissory note without interest was made on December 1, 2001, due
December 31, 2001 and paid in full on December 18, 2001. Jui-Hung Wang's $99,500
recourse promissory note without interest was made on December 24, 2001, due
April 1, 2002 and paid in full on January 30, 2002. The terms of the notes were
consistent with the terms of notes of third parties who purchased Units in the
private placement from Color.

We believe that the terms of the loans and borrowings from affiliates were
on terms more favorable than were otherwise available from third parties.

DESCRIPTION OF SECURITIES

Our articles of incorporation authorize the issuance of up to 20,000,000 shares
of common stock, $0.01 par value per share. As of March 31, 2002, 10,099,880
shares of our common stock are issued and outstanding. Our articles of
incorporation also authorize the issuance of up to 1,000,000 shares of preferred
stock, $0.01 par value per share. As of the date of this prospectus, we have no
issued and outstanding preferred stock, and we currently have no plans to issue
any shares of preferred stock. The board of directors does, however, have the
authority, without action by the stockholders, to issue all or any portion of
the authorized but unissued preferred stock in one or more series and to
determine the voting rights, preferences as to dividends and liquidation,
conversion rights, and other rights of such series. Such preferred stock, if and
when issued, may carry rights superior to those of the common stock.

On all matters submitted to a vote of the stockholders, each holder of common
stock has the right to one vote for each share held of record. Subject to any
dividend preferences granted to any preferred stock that may be outstanding in
the future, holders of our common stock are entitled to receive ratably such
dividends as may be declared by the board of directors. In the event of a
liquidation, dissolution or winding up of our company, holders of our common
stock are entitled to share ratably in all assets remaining after payment of
liabilities and the liquidation preferences of any outstanding shares of
preferred stock. Holders of our common stock have no preemptive rights and no
right to convert their common stock into any other securities. There are no
redemption or sinking fund provisions applicable to our common stock.

WARRANTS

COLOR WARRANTS

The following is a brief summary of certain provisions of our warrants that
comprise the Units offered by us in this offering. This summary does not purport
to be complete and is qualified in all respects by reference to the actual text
of the warrant agreement between us and American Stock Transfer & Trust Company,
the warrant agent. The address of the warrant agent is 6201 15th Avenue, 3rd
Floor, Brooklyn, New York 11219 and its telephone number is (718) 921-8208. A
copy of the warrant agreement has been filed as an exhibit to this registration
statement of which this prospectus is a part.

Exercise Price and Terms. Each warrant entitles the registered holder thereof to
purchase, at any time after the effective date of this prospectus, one share of
common stock at a price of $2.00 per share, subject to adjustment in accordance
with the anti-dilution and other provisions referred to below. The warrants
expire on December 31, 2003. The holder of any warrant may exercise such
warrant, in whole or in part, by surrendering the certificate representing the
warrant to the warrant agent, with the subscription form thereon properly
completed and executed, together with payment of the exercise price. If any
warrant is exercised in part, the unexercised balance will be returned to the
warrantholder. In addition, warrantholders will not be permitted to make
cashless exercises of such warrants. No fractional shares will be issued upon
exercise of the warrants. Warrants may only be exercised in such multiples as
are required to permit the issuance by Color of one or more whole shares. If any
fraction of a share shall be issuable on the exercise of any warrant, Color
shall pay an amount in cash equal to such fraction multiplied by the then
current market value of a share of common stock.

Adjustment. The exercise price and the number of shares of common stock
purchasable upon the exercise of the warrants are subject to adjustment upon the
occurrence of certain events, including stock dividends, stock splits,
combination or reclassifications of our common stock. Additionally, an
adjustment will be made in the case of a reclassification or exchange of our
common stock, consolidation or merger of our company with or into another
corporation (other than a consolidation or merger in which we are the surviving
corporation), or sale of all or substantially all of our assets, in order to
enable warrant holders to acquire the kind and number of shares of stock or
other securities or property receivable in such event by a holder of the number
of shares of common stock that might have been purchased upon the exercise of
the warrant.

Transfer, Exchange and Exercise. The warrants are in registered form and may be
presented to the warrant agent for transfer, exchange or exercise at any time on
or prior to their expiration on December 31, 2003, at which time the warrants
become wholly void and of no value.

Warrant holder Not a Stockholder. The warrants do not confer upon holders any
voting, dividend or other rights as stockholders of our company. No other
modification may be made to the warrants without the consent of two-thirds of
the warrantholders.

Modification of Warrant. Color and the warrant agent may make such modifications
to the warrant as they deem necessary or desirable that do not adversely affect
the interests of the warrant holders. No other modification may be made to the
warrants without the consent of two-thirds of the warrant holders.

Current Prospectus. The warrants are not exercisable unless, at the time of the
exercise, we have a current prospectus covering the shares of common stock
issuable upon exercise of the warrants, and such shares have been registered,
qualified or deemed to be exempt under the securities or "blue sky" laws of the
state of residence of the exercising holder of the warrants. Although we will
use our best efforts to have all the shares of common stock issuable upon
exercise of the warrants registered or qualified on or before the exercise date
and to maintain a current prospectus relating thereto until the expiration of
the warrants, there can be no assurance that we will be able to do so.

Up to 961,257 shares of our common stock are issuable pursuant to warrants that
we have issued to the selling stockholders, and the shares underlying these
warrants are being offered hereby. These warrants are exercisable for two years
from the date of issuance at an exercise price of $2.00 per share. The warrants
provide for adjustments in the event of certain stock dividends, stock splits,
consolidations, reclassifications or recapitalizations, and entitle the holders
to receive, upon exercise of the warrant, certain distributions made to our
stockholders in the event of certain significant transactions such as a
reorganization or merger, the sale or lease of a significant portion of our
assets or any dissolution, liquidation or winding up of our company.

CHARTER PROVISIONS AND DELAWARE LAWS THAT MAY HAVE AN ANTI-TAKEOVER EFFECT

Some provisions of Delaware law and our amended and restated certificate of
incorporation and bylaws could make the following more difficult:

o acquisition of us by means of a tender offer;

o acquisition of us by means of a proxy contest or otherwise; or

o removal of our incumbent officers and directors.

These provisions, summarized below, are expected to discourage coercive takeover
practices and inadequate takeover bids. These provisions are also designed to
encourage persons seeking to acquire control of us to first negotiate with our
Board of Directors. We believe that the benefits of increased protection of our
potential ability to negotiate with the proponent of an unfriendly or
unsolicited proposal to acquire or restructure us outweigh the disadvantages of
discouraging such proposals because negotiation of such proposals could result
in an improvement of their terms.

Delaware Anti-Takeover Law. We are subject to Section 203 of the Delaware
General Corporation Law, an anti-takeover law. In general, Section 203 prohibits
a publicly held Delaware corporation from engaging in a "business combination"
with an "interested stockholder" for a period of three years following the date
the person became an interested stockholder, unless the "business combination"
or the transaction in which the person became an interested stockholder is
approved in a prescribed manner. Generally, a "business combination" includes a
merger, asset or stock sale, or other transaction resulting in a financial
benefit to the interested stockholder. Generally, an "interested stockholder" is
a person who, together with affiliates and associates, owns or within three
years prior to the determination of interested stockholder status, did own, 15%
or more of a corporation's voting stock. The existence of this provision may
have an anti- takeover effect with respect to transactions not approved in
advance by the Board of Directors, including discouraging attempts that might
result in a premium over the market price for the shares of common stock held by
stockholders.

Elimination of Cumulative Voting. Our amended and restated certificate of
incorporation and bylaws do not provide for cumulative voting in the election of
directors. Cumulative voting provides for a minority stockholder to vote a
portion or all of its shares for one or more candidates for seats on the Board
of Directors. Without cumulative voting, a minority stockholder will not be able
to gain as many seats on our Board of Directors based on the number of shares of
our stock that such stockholder holds than if cumulative voting were permitted.
The elimination of cumulative voting makes it more difficult for a minority
stockholder to gain a seat on our Board of Directors and to influence the Board
of Directors' decision regarding a takeover.

Undesignated Preferred Stock. The authorization of undesignated preferred stock
makes it possible for the Board of Directors to issue preferred stock with
voting or other rights or preferences that could impede the success of any
attempt to change the control of our company. These and other provisions may
have the effect of deterring hostile takeovers or delaying changes in control or
management of our company.

TRANSFER AGENT

The transfer agent and registrar for our common stock is American Stock Transfer
and Trust Company, Brooklyn, New York.

MATERIAL FEDERAL TAX CONSIDERATIONS

The following discussion sets forth certain federal income tax consequences,
under current law, relating to the purchase and ownership of the Units and the
underlying common stock and warrants. This discussion is a summary and does not
purport to deal with all aspects of federal income taxation that may be
applicable to an investor, nor does it consider specific facts and circumstances
that may be relevant to a particular investor's tax position. Some holders, such
as dealers in securities, insurance companies, tax-exempt organizations, foreign
persons, and those holding Units, common stock or warrants as part of a straddle
or hedge transaction, may be subject to rules that are not addressed in this
discussion. This discussion is based on the current provisions of the Internal
Revenue Code of 1986 and on administrative and judicial interpretations as of
the date hereof, all of which are subject to change. You should consult you own
tax advisor as to the specific tax consequences to you of this offering,
including the applicability of federal, state, local and foreign tax laws.

ALLOCATION OF PURCHASE PRICE

Each Unit as a whole will have a tax basis equal to the cost of the Unit. The
measure of income or loss from some of the transactions described below depends
on the tax basis in the warrant and the common stock comprising the Unit. The
tax basis for each of the warrant and the common stock will be determined by
allocating the cost of the Unit between the securities that comprise the Unit in
proportion to their respective fair market values of these securities at the
time of acquisition.

EXERCISE AND SALE OF WARRANTS

No gain or loss will be recognized by a holder of a warrant on the purchase of
shares of common stock received upon exercise of a warrant, except that gain
will be recognized to the extent cash is received in lieu of fractional shares.
The tax basis of common stock received upon exercise of a warrant will equal the
sum of the holder's tax basis for the exercised warrant and the warrant exercise
price. The holding period of the common stock acquired will begin on the date
the warrant is exercised and the common stock is purchased, and does not include
the period during which the warrant was held.

Gain or loss from the sale or other disposition of a warrant, or loss in the
event the warrant expires unexercised, other than on a redemption by us, will be
capital gain or loss to its holder if the common stock to which the warrant
relates would have been a capital asset in the hands of such holder. The capital
gain or loss will be long- term capital gain or loss if the holder has held the
warrant for more than one year at the time of sale, disposition or lapse. On the
redemption of a warrant by us, the holder generally will realize capital gain or
loss. Individuals generally have a maximum federal income tax of 20% on
long-term capital gains. The deduction of capital losses is subject to
limitations.

SALE OF COMMON STOCK

The sale of common stock should generally result in the recognition of gain or
loss to the holder in an amount equal to the difference between the amount
realized and such holder's tax basis in the common stock. If the common stock
constitutes a capital asset in the hand of the holder, gain or loss upon the
sale of the common stock will be characterized as long-term or short-term
capital gain or loss, depending on whether the common stock has been held for
more than one year. Individuals generally have a maximum federal income tax of
20% on long-term capital gains. The deduction of capital losses is subject to
limitations.

EXPIRATION OF WARRANTS WITHOUT EXERCISE

If a holder of a warrant allows it to expire without exercise, the expiration
will be treated as a sale or exchange of the warrant on the expiration date. The
holder will have a loss equal to the amount of such holder's tax basis in the
lapsed warrant. If the warrant constitutes a capital asset in the hands of the
holder, the loss will be characterized as long-term or short-term capital loss,
depending on whether the warrant was held for more than one year. The deduction
of capital losses is subject to limitations.

SELLING STOCKHOLDERS

The shares set forth in the table below are being offered by the selling
stockholders listed below. We have registered these shares for the selling
stockholders in this offering because of registration rights we granted to the
selling stockholders when we sold our common stock to them. Some of the common
stock listed in the table is not presently owned by the selling stockholders,
but is issuable upon exercise of warrants. The selling stockholders are not
required to sell all or any of the common stock. We believe that the
registration of the shares underlying the warrants, even though we may not be
obligated to do so, will encourage the warrant holders to exercise the warrants,
thereby benefiting us because we will receive the exercise price paid.

The following table states the name of each of the selling stockholders, states
the number of shares of our common stock beneficially owned by each selling
stockholder as of May 17, 2002, number of shares which may be sold for the
account of each selling stockholder, the number of shares of common stock that
will be beneficially owned by each selling stockholder after the completion of
the offering assuming the sale of all shares offered, and the percentage of
Color common stock owned by each selling stockholder after the completion of the
offering, assuming the sale of all shares offered.

BENEFICIAL OWNERSHIP
AFTER THE OFFERING (2)
SHARES OWNED SHARES TO BE --------------------------------------
NAME BEFORE OFFERING (1) SOLD IN OFFERING SHARES PERCENTAGE
------------------------------------- -------------------------- ---------------------- ----------------- ---------------

The Blaine Group, Inc. (3)........... 10,000 10,000 0 0
Sueling Wang (4)..................... 1,815,347 856,847 958,500 6.8%
Gerald M. Chizever (5)............... 45,000 45,000 0 0
Allan Duboff (6)..................... 10,000 10,000 0 0
Kresimir Peharda (7)................. 5,455 5,455 0 0
Fredric N. Richman (8)............... 25,000 25,000 0 0
Yik-Li Sih (9)....................... 141,204 95,204 46,000 *
Sal G. Giacinto (10)................. 15,000 15,000 0 0
Patrick D. Salas (11)................ 15,000 15,000 0 0
Brian N. Hollander (12).............. 20,000 20,000 0 0
Howard Kaufman (13).................. 2,629 2,000 629 *
Jui-Chi Wang (14).................... 689,450 618,835 70,615 *
Maynard Hollander (15)............... 50,000 50,000 0 0
Shobha Patel (16).................... 12,260 7,260 5,000 *
Mark Edward Palmer (17).............. 9,000 9,000 0 0
Victor A. Hollander (18)............. 105,000 100,000 5,000 0
Jui-Hung Wang (19)................... 704,178 563,173 141,005 1.0%
Chechang Yeh......................... 445,205 145,205 300,000 2.1%
Jui-Kung Wang........................ 316,209 120,204 196,005 1.4%
Burns Hoffman (20)................... 200,000 200,000 0 0
Doug Casey (21)...................... 100,000 100,000 0 0
Morris H. Wolf (22).................. 25,000 25,000 0 0
Arash Khalili (23)................... 2,000 2,000 0 0
Howard N. Addison (24)............... 30,000 30,000 0 0
Neal McNally (25).................... 25,000 25,000 0 0
Carl H. Spatz (26)................... 8,697 5,000 3,697 *
Lancing Holdings Ltd. (27)........... 40,000 40,000 0 0
Thomas D. Hesselbrock (28)........... 8,697 5,000 3,697 *
Lionel Brown (29).................... 25,000 25,000 0 0
Flora Chung (30)..................... 8,529 3,529 5,000 *
Chia-An L. Shieh (31)................ 17,196 7,058 10,138 *
John G. Myers (32)................... 58,951 58,951 0 0
Larry Gordon (33).................... 70,886 70,886 0 0

Stephen Chromik (34)................. 450,000 450,000 0 0
Colin J. Reynolds (35)............... 10,000 10,000 0 0
Michael Edson (36)................... 38,880 38,880 0 0
IndustriCorp and Co., Inc. FBO
David N. Kunz IRA Rollover (37)... 50,000 50,000 0 0

G-V Capital Corp. (38)............... 200,000 100,000 100,000 0
-------------------------- ---------------------- -----------------
Total................................ 5,804,773 3,959,487 1,845,286

----------
* Less than 1%

(1) Percentage of ownership for each holder is calculated based on 10,099,880
shares of common stock outstanding on May 17, 2002. Beneficial ownership is
determined in accordance with the SEC Rule 13d-3 and generally includes
shares over which the holder has voting or investment power, subject to
community property laws. All shares of common stock obtainable upon
conversion of securities or exercise of stock options or warrants
(including those that are not currently exercisable but will become
exercisable within 60 days hereafter) are considered to be beneficially
owned by the person holding the options or warrants for computing that
person's percentage, but are not treated as outstanding for computing the
percentage of any other person.

(2) Assumes all offered Color common stock will be sold and that no additional
shares of Color common stock will be issued by Color or acquired by any
selling stockholder prior to the completion of the offering.

(3) Devon Blaine is the principal and sole stockholder of the Blaine Group,
Inc.

(4) Dr. Wang owns directly 965,347 shares of our common stock of which 856,847
shares are offered in this prospectus. Also, includes 600,000 shares owned
by Sueling Wang's four children and options to purchase 250,000 shares of
common stock. Excludes 141,204 shares of common stock beneficially owned by
his wife, Yik-Li Sih. Dr. Wang is a director and officer of our company.

(5) Mr. Chizever owns directly 22,500 shares of our common stock and 22,500
warrants exercisable into shares of our common stock. All such shares and
warrants exercisable into shares of common stock may be sold for the
account of the selling stockholder. Mr. Chizever is a partner of Richman
Mann Chizever Phillips & Duboff, our former legal counsel.

(6) Mr. Duboff owns directly 5,000 shares of our common stock and 5,000
warrants exercisable into shares of our common stock. All such shares and
warrants exercisable into shares of common stock may be sold for the
account of the selling stockholder. Mr. Duboff is a partner of Richman Mann
Chizever Phillips & Duboff, our former legal counsel.

(7) Mr. Peharda owns directly 3,955 shares of our common stock and 1,500
warrants exercisable into shares of our common stock. All such shares and
warrants exercisable into shares of common stock may be sold for the
account of the selling stockholder. Mr. Peharda is an attorney at Richman
Mann Chizever Phillips & Duboff, our former legal counsel.

(8) Mr. Richman owns directly 12,500 shares of our common stock and 12,500
warrants exercisable into shares of our common stock. All such shares and
warrants exercisable into shares of common stock may be sold for the
account of the selling stockholder. Mr. Richman is a partner of Richman
Mann Chizever Phillips & Duboff, our former legal counsel.

(9) The 141,204 shares of common stock beneficially owned by Ms. Sih are not
included in the totals for Dr. Sueling Wang as described in note 4 above.
Of the 141,204 shares owned by Ms. Sih, 95,204 may be sold for the account
of the selling stockholder.

(10) Mr. Giacinto owns directly 7,500 shares of our common stock and 7,500
warrants exercisable into shares of our common stock. All such shares and
warrants exercisable into shares of common stock may be sold for the
account of the selling stockholder.

(11) Mr. Salas owns directly 7,500 shares of our common stock and 7,500 warrants
exercisable into shares of our common stock. All such shares and warrants
exercisable into shares of common stock may be sold for the account of the
selling stockholder.

(12) Mr. Hollander owns directly 10,000 shares of our common stock and 10,000
warrants exercisable into shares of our common stock. All such shares and
warrants exercisable into shares of common stock may be sold for the
account of the selling stockholder.

(13) Mr. Kaufman owns directly 1,629 shares of our common stock of which 1,629
shares of common stock and 381 warrants exercisable into shares of our
common stock may be sold for the account of the selling stockholder.

(14) Mr. Wang owns directly 679,450 shares of our common stock of which 618,835
may be sold for the account of the selling stockholder. Includes options to
purchase 10,000 shares of our common stock. Mr. Wang is one of our
directors.

(15) Mr. Hollander owns directly 25,000 shares of our common stock and 25,000
warrants exercisable into shares of our common stock. All such shares and
warrants exercisable into shares of common stock may be sold for the
account of the selling stockholder.

(16) Ms. Patel owns directly 7,260 shares of our common stock of which 7,260
shares may be sold for the account of the selling stockholder. Includes
5,000 options to purchase our common stock. Ms. Patel is one of our
managers.

(17) Mr. Palmer owns directly 4,500 shares of our common stock and 4,500
warrants exercisable into shares of our common stock. All such shares and
warrants exercisable into shares of common stock may be sold for the
account of the selling stockholder.

(18) Mr. Hollander owns directly 50,000 shares of our common stock, 50,000
warrants exercisable into shares of our common stock and 5,000 options to
purchase shares of common stock. All such shares and warrants exercisable
into shares of common stock may be sold for the account of the selling
stockholder. Mr. Hollander is one of our directors.

(19) Mr. Wang owns directly 699,178 shares of our common stock of which 563,173
shares may be sold for the account of the selling stockholder. Includes
5,000 shares of common stock underlying options to purchase common stock.
Mr. Wang is one of our directors.

(20) Mr. Hoffman owns directly 100,000 shares of our common stock and 100,000
warrants exercisable into shares of our common stock. All such shares and
warrants exercisable into shares of common stock may be sold for the
account of the selling stockholder.

(21) Mr. Casey owns directly 50,000 shares of our common stock and 50,000
warrants exercisable into shares of our common stock. All such shares and
warrants exercisable into shares of common stock may be sold for the
account of the selling stockholder.

(22) Mr. Wolf owns directly 12,500 shares of our common stock and 12,500
warrants exercisable into shares of our common stock. All such shares and
warrants exercisable into shares of common stock may be sold for the
account of the selling stockholder.

(23) Mr. Khalili owns directly 1,000 shares of our common stock and 1,000
warrants exercisable into shares of our common stock. All such shares and
warrants exercisable into shares of common stock may be sold for the
account of the selling stockholder. Mr. Khalili is an attorney at Richman
Mann Chizever Phillips & Duboff, formerly legal counsel.

(24) Mr. Addison owns directly 15,000 shares of our common stock and 15,000
warrants exercisable into shares of our common stock. All such shares and
warrants exercisable into shares of common stock may be sold for the
account of the selling stockholder.

(25) Mr. McNally owns directly 12,500 shares of our common stock and 12,500
warrants exercisable into shares of our common stock. All such shares and
warrants exercisable into shares of common stock may be sold for the
account of the selling stockholder.

(26) Mr. Spatz owns directly 6,197 shares of our common stock of which 5,000
shares may be sold for the account of the selling stockholder. Includes
2,500 shares of common stock underlying warrants to purchase common stock.

(27) Lancing Holdings Ltd. owns directly 20,000 shares of our common stock and
20,000 warrants exercisable into shares of our common stock. All such
shares and warrants exercisable into shares of common stock may be sold for
the account of the selling stockholder. John Nichols is the principal and
beneficial owner of Lancing Holdings Ltd.

(28) Mr. Hesselbrook owns directly 6,197 shares of our common stock of which
5,000 shares may be sold for the account of the selling stockholder.
Includes 2,500 shares of common stock underlying warrants to purchase
common stock.

(29) Mr. Brown owns directly 12,500 shares of our common stock and 12,500
warrants exercisable into shares of our common stock. All such shares and
warrants exercisable into shares of common stock may be sold for the
account of the selling stockholder.

(30) Flora Chung owns directly 3,529 shares of our common stock and all such
shares may be sold for the account of the selling stockholder. Includes
5,000 shares of common stock underlying options to purchase common stock.
Ms. Chung is our accounting manager.

(31) Mr. Shieh owns directly 7,058 shares of our common stock and all such
shares may be sold for the account of the selling stockholder. Includes
5,138 shares of common stock in which Ms. Shieh may be deemed to have a
beneficial ownership interest which are beneficially owned by Ms. Shieh's
husband, Shiuh An Shieh and 5,000 shares of common stock underlying options
to purchase common stock. Mr. Shieh is our controller.

(32) Includes 58,951 warrants exercisable into shares of our common stock. All
such shares and warrants exercisable into shares of common stock may be
sold for the account of the selling stockholder.

(33) Includes 70,886 warrants exercisable into shares of our common stock. All
such shares and warrants exercisable into shares of common stock may be
sold for the account of the selling stockholder.

(34) Mr. Chromik owns directly 150,000 shares of our common stock and 300,000
warrants exercisable into shares of our common stock. All such shares and
warrants exercisable into shares of common stock may be sold for the
account of the selling stockholder.

(35) Mr. Reynolds owns directly 5,000 shares of our common stock and 5,000
warrants exercisable into shares of our common stock. All such shares and
warrants exercisable into shares of common stock may be sold for the
account of the selling stockholder.

(36) Mr. Edson owns directly 12,960 shares of our common stock and 25,920
warrants exercisable into shares of our common stock. All such shares and
warrants exercisable into shares of common stock may be sold for the
account of the selling stockholder.

(37) Mr. Kunz IRA owns directly 25,000 shares of our common stock and 25,000
warrants exercisable into shares of our common stock. All such shares and
warrants exercisable into shares of common stock may be sold for the
account of the selling stockholder.

(38) G-V Capital Corp. owns directly 100,000 shares of our common stock and
100,000 warrants exercisable into shares of our common stock. All such
warrants exercisable into shares of our common stock may be sold for the
account of the selling stockholder. Lawrence E. Kaplan is the principal and
beneficial owner of G-V Capital Corp.

PLAN OF DISTRIBUTION

UNITS AND SHARES OFFERED BY COLOR IMAGING, INC.

We are offering to sell up to 3,500,000 Units. The price per Unit is $2.00 for
an aggregate offering price of $7,000,000. Each Unit consists of one share of
common stock and a warrant to purchase one share of common stock at an exercise
price of $2.00. The warrant expires on December 31, 2003. We will require
investors to purchase at least 100,000 Units.

Our offer is limited to a maximum of either 7,000,000 shares of common stock or
3,500,000 Units or a combination thereof.

Our officers and directors will offer and sell the Units and shares of common
stock directly to investors. Officers and directors will not receive any
commission from the sale of any Units or common stock. Officers and directors
will not register as broker-dealers pursuant to Section 15 of the Securities and
Exchange Act of 1934 in reliance upon Rule 3a4-1, which sets forth those
conditions under which a person associated with an issuer may participate in the
offering of the issuer's securities and not be deemed to be a broker-dealer.
These conditions included the following:

o None of the selling persons are subject to a statutory
disqualification, as that term is defined in Section 3(a)(39) of the
Exchange Act, at the time of participation;

o None of such persons are compensated in connection with his or her
participation by the payment of commissions or other remuneration
based either directly or indirectly on transactions in securities;

o None of the selling persons are, at the time of participation, an
associated person of a broker-dealer; and

o All of the selling persons meet the conditions of paragraph (a)(4)
(ii) of Rule 3a4-1 of the Exchange Act, in that they:

o primarily perform or are intending primarily to perform at the
end of the offering, substantial duties for or on behalf of the
issuer otherwise than in connection with transactions in
securities; and

o are not a broker or dealer, or an associated person of a broker
or dealer, within the preceding twelve months; and

o do not participate in selling and offering of securities for any
issuer more than once every twelve months other than in reliance
on this rule.

Since the offering is self-underwritten, we intend to distribute this prospectus
to potential investors with whom management is acquainted who are interested in
us and a possible investment in the offering.

This offering will commence on the date of this prospectus and continue until
June 30, 2003, unless we sell all the Units or our common stock prior to that
date or the date is otherwise extended until December 31, 2003. We may terminate
this offering at any time, for any reason; thus not selling any or all of the
Units or common stock offered. There is no minimum number of Units or shares of
common stock that we are required to sell.

Subscription Procedure

If you decide to subscribe for Units or shares of common stock in this offering,
you will be required to execute a subscription agreement and tender it, together
with a check or wired funds to us, for acceptance or rejection. You may
subscribe for the minimum number or more of our Units or shares of common stock
in this offering. All checks should be made payable to Color Imaging, Inc. A
copy of the subscription agreement will accompany a prospectus or may be
obtained from us by persons who have received a prospectus and requested the
agreement. We may not accept a subscription for Units or shares of common stock
until at least five business days after the date you receive this prospectus. We
have the right to accept or reject subscriptions in whole or in part, for any
reason or for no reason. All monies from rejected subscriptions will be returned
immediately by us to the subscriber, without interest or deductions.

Subscriptions for securities will be accepted or rejected promptly. Once
accepted, the funds will be deposited in an account maintained by us and
considered assets of Color once cleared by our bank. Subscription funds will not
be deposited in an escrow account. We will immediately use all of the proceeds
received from the sale of the Units or shares of common stock. The proceeds
shall be non-refundable except as required by law. Certificates for the
securities purchased will be issued and distributed by our transfer agent,
within a reasonable time after a subscription is accepted and "good funds" are
received in our account. Certificates will be sent to the address supplied in
the investor's subscription agreement.

Our officers, directors and their affiliates may purchase Units or shares of
common stock in this offering.

We may utilize broker-dealer(s) or underwriter(s) to offer and sell the Units or
shares of our common stock. Other than broker-dealer(s), underwriter(s) or
finders, we do not intend to pay compensation to any other person in connection
with the offer and sale of the Units or our common stock.

If sales are made to broker-dealers as principals, we will file a post-effective
amendment to the registration statement of which the prospectus forms a part. In
such post-effective amendment, we will disclose the names of any participating
broker-dealers and the compensation arrangements relating to such sales. In
addition, if any shares of common stock or warrants offered for sale pursuant to
this prospectus are transferred for value, subsequent holders cannot use this
prospectus until a post-effective amendment is filed, naming such holders.

Broker-dealers may engage other broker-dealers to participate in sales.
Broker-dealers may receive commissions or discounts from the selling of our
common stock or warrants (or if any broker-dealer acts as agent for the
purchaser of shares, from the purchaser) in amounts to be negotiated. We do not
expect these commissions and discounts to exceed what is customary in the types
of transactions involved.

Any broker-dealer that assists with the sale of our common stock and warrants
may be deemed to be an underwriter within the meaning of Section 2(11) of the
Securities Act of 1933, and any commissions received by them and any profit on
the resale of our stock as a principal may be deemed to be underwriting
discounts and commissions under the Securities Act. We may agree to indemnify
any agent, dealer or broker-dealer that participates in transactions involving
sales of our stock and warrants against certain liabilities, including
liabilities arising under the Securities Act. Because any agent, dealer or
broker-dealer may be deemed to be an underwriter, such person will be subject to
prospectus delivery requirements under the Securities Act. Furthermore, in the
event of a distribution of the stock and warrants, we, any selling broker-dealer
and any affiliated purchasers may be subject to Regulation M, which prohibits
any stabilizing bid or stabilizing purchase for the purpose of pegging, fixing
or stabilizing the price of our common stock in connection with that
distribution.

SELLING STOCKHOLDERS

We are registering the sale of the common stock and common stock underlying
warrants on behalf of the selling stockholders, who are free to offer and sell
our stock at such times, in such manner and at such prices as they may
determine. We will pay the costs of registering the sales of our stock. Our
common stock may be offered by the selling stockholders in one or more types of
transactions, which may or may not involve brokers, dealers or cash
transactions. The selling stockholders may also use Rule 144 under the
Securities Act to sell our stock, if they meet the criteria and conform to the
requirements of that rule. There is no underwriter or coordinating broker acting
in connection with the proposed sale of our stock by the selling stockholders.
The sales of our stock may also be effected from time to time by the following
means:

o transactions on the OTC Bulletin Board at market price through
ordinary broker transactions, including block transactions;

o negotiated transactions; or,

o a combination of the above methods of sale at fixed prices, which may
be changed, at market prices prevailing at the time of sale, or at
negotiated prices

The selling stockholders may sell common stock directly to purchasers or through
broker-dealers which may act as agents or principals. Broker-dealers may receive
compensation in the form of discounts, concessions or commissions from the
selling stockholders.

The selling stockholders and any broker-dealers that act in connection with the
sale of our common stock may be deemed to be underwriters within the meaning of
Section 2(11) of the Securities Act, and any commissions received by them and
any profit on the resale of our stock as principal may be deemed to be
underwriting discounts and commissions under the Securities Act. The selling
stockholders may agree to indemnify any agent, dealer commissions or broker-
dealer that participates in transactions involving sales of our stock against
certain liabilities, including liabilities arising under the Securities Act.

Because the selling stockholders may be deemed to be underwriters, they will be
subject to prospectus delivery requirements under the Securities Act.
Furthermore, in the event of a distribution of our stock, the selling
stockholders, any selling broker-dealer and any affiliated purchasers may be
subject to Regulation M, which prohibits any stabilizing bid or stabilizing
purchase for the purpose of pegging, fixing or stabilizing the price of our
common stock in connection with that distribution. As used herein, selling
stockholders, includes donees and pledgees selling our shares from a named
selling stockholder after the date of this prospectus.

LEGAL MATTERS

The validity of the shares of common stock offered by this prospectus will
be passed upon for Color by Arnall Golden Gregory LLP, Atlanta, Georgia.

INDEPENDENT AUDITORS

The consolidated financial statements of Color our subsidiary as of
December 31, 2001, and for each of the years in the two-year period ended
December 31, 2001, included in this prospectus and elsewhere in the registration
statement have been so included herein in reliance upon the report of Lazar
Levine & Felix LLP, and upon the authority of said firm as experts in accounting
and auditing.

INDEMNIFICATION

Our certificate of incorporation allows us to indemnify our officers and
directors to the maximum extent allowed under Delaware law. This includes
indemnification for liability which could arise under the Securities Act.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers or persons controlling the
registrant under these provisions, the registrant has been informed that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is therefore unenforceable.

FURTHER INFORMATION

You should rely only on the information in this prospectus or any prospectus
supplement hereto this prospectus. We have not authorized anyone else to provide
you with different information. Offers of the securities are being made only in
states where the offers are permitted. You should not assume that the
information in this prospectus or any prospectus supplement is accurate as of
any date other than the date on the front of those documents.

This prospectus is part of a Registration Statement on Form SB-2 that has been
filed with the SEC. It does not include all of the information that is in the
registration statement and the additional documents filed as exhibits with it.
For more detailed information, you should read the exhibits themselves.

We are subject to the informational requirements of the Exchange Act and, in
accordance with it, are required to file reports, proxy and information
statements, and other information with the SEC. Such reports, proxy and
information statements and other information can be inspected and copied at the
SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549.
The public may obtain information about the operation of the Public Reference
Room by calling the SEC at 1-800-SEC-0330. We electronically file reports, proxy
and information statements, and other information with the SEC. The SEC
maintains an Internet website that contains our electronically filed reports,
proxy and information statements, and other information at http://www.sec.gov.
We maintain Internet websites at http://www.colorimage-micr.com and at
http://www.logical-imaging.com. Our common stock is traded on the NASDAQ OTC
Bulletin Board under the symbol CIMG.

INDEX TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

Consolidated Condensed Balance Sheets at March 31, 2002
(Unaudited) and December 31, 2001(Audited)..................................F-2

Consolidated Condensed Statements of Operations (Unaudited)
for the Three Months ended March 31, 2002 and 2001..........................F-3

Consolidated Condensed Statements of Cash Flows (Unaudited)
for the Three Months ended March 31, 2002 and 2001..........................F-4

Notes to Interim Unaudited Consolidated Condensed Financial
Statements..................................................................F-5

Report of Independent Certified Public Accountants..........................F-6

Consolidated Balance Sheets
for the years ended December 31, 2001 and 2000 (Restated) ..................F-7

Consolidated Statement of Operations
for the years ended December 31, 2001 and 2000 (Restated)...................F-8

Consolidated Statements of Stockholders' Equity
for the years ended December 31, 2001 and 2000 (Restated)...................F-9

Consolidated Statements of Cash Flows
for the years ended December 31, 2001 and 2000 (Restated)...................F-10

Notes to Consolidated Financial Statements
for the years ended December 31, 2001 and 2000 (Restated)...................F-11

F-1

COLOR IMAGING, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEETS

THREE MONTHS ENDED YEAR ENDED
31-MAR-02 31-DEC-01
ASSETS (UNAUDITED) (AUDITED)
--------------------------------- ----------------------------
CURRENT ASSETS
Cash $ 685,386 $ 395,327
Accounts receivable, net 3,487,226 3,030,995
Inventory 5,814,898 6,056,042
Deferred income taxes 244,238 277,239
Related party portion of IDR bond 79,596 79,596
Other current assets 342,264 339,141
--------------------------------- ----------------------------

TOTAL CURRENT ASSETS 10,653,608 10,178,340
--------------------------------- ----------------------------

PROPERTY, PLANT AND EQUIPMENT - NET 8,585,022 8,438,826
--------------------------------- ----------------------------

OTHER ASSETS
Patent/intellectual property 9,326 5,000
Deferred income taxes 267,000 312,000
Related party portion of IDR bond 818,500 818,500
Other assets 224,654 225,204
--------------------------------- ----------------------------

TOTAL OTHER ASSETS 1,319,480 1,360,704
--------------------------------- ----------------------------

$ 20,558,110 $ 19,977,870
================================= ============================

LIABILITIES & STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Revolving credit lines $ 1,431,692 $ 1,462,416
Accounts payable 4,909,611 4,898,665
Current portion of notes payable 877,684 369,198
Current portion of bonds payable 335,000 335,000
Other current liabilities 408,129 501,086
--------------------------------- ----------------------------

TOTAL CURRENT LIABILITIES 7,962,116 7,566,365
--------------------------------- ----------------------------

LONG TERM LIABILITIES
Notes payable 1,283,899 1,359,000
Bonds payable 3,445,000 3,445,000
--------------------------------- ----------------------------

LONG TERM LIABILITIES 4,728,899 4,804,000
--------------------------------- ----------------------------

TOTAL LIABILITIES 12,691,015 12,370,365
--------------------------------- ----------------------------

COMMITMENTS & CONTINGENCIES

STOCKHOLDERS' EQUITY
Common stock, $.01 par value, authorized 20,000,000
shares; 10,099,880 and 10,099,175 shares issued and
outstanding on March 31, 2002 and
December 31, 2001, respectively 100,999 100,992
Additional paid-in capital 9,868,283 9,873,939
Stock subscription receivable -- (149,000)
Accumulated deficit (2,102,187) (2,218,426)
--------------------------------- ----------------------------

TOTAL STOCKHOLDERS' EQUITY 7,867,095 7,607,505
--------------------------------- ----------------------------
$ 20,558,110 $ 19,977,870
================================= ============================

See Accompanying Notes

F-2

COLOR IMAGING, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTH PERIODS ENDED MARCH 31
(UNAUDITED)

2002 2001
----------------------------- ----------------------------

SALES $ 7,859,078 $ 5,528,316
COST OF SALES 6,589,293 4,514,325

----------------------------- ----------------------------
GROSS PROFIT 1,269,785 1,013,991
----------------------------- ----------------------------

OPERATING EXPENSES:
Administrative 460,966 456,181
Research & development 262,364 216,909
Sales & marketing 276,415 225,681
----------------------------- ----------------------------

999,745 898,771
----------------------------- ----------------------------

OPERATING PROFIT 270,040 115,220
----------------------------- ----------------------------

OTHER INCOME (EXPENSE) :
Interest and other income 6,868 7,831
Interest & financing expense (80,663) (120,574)
Non-recurring moving expense -- (9,719)
----------------------------- ----------------------------
(73,795) (122,462)
----------------------------- ----------------------------

INCOME (LOSS) BEFORE TAXES 196,245 (7,242)

PROVISIONS (BENEFIT) FOR INCOME TAXES 80,006 (1,900)
----------------------------- ----------------------------

NET INCOME (LOSS) $ 116,239 $ (5,342)
============================= ============================

INCOME (LOSS) PER COMMON SHARE
Basic $ .01 $ --

Diluted $ .01 $ --

COMMON SHARES OUTSTANDING
WEIGHTED AVERAGE SHARES:

Basic 10,099,567 7,540,551
============================= ============================

Diluted 10,201,615 7,877,911
============================= ============================

See Accompanying Notes

F-3

COLOR IMAGING, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTH PERIODS ENDED MARCH 31
(UNAUDITED)

2002 2001
-------------------------- --------------------------
Cash flows from operating activities:
Net income $ 116,239 $ (5,342)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 149,549 152,200
Deferred income taxes 78,001 (2,911)

Decrease (increase) in:
Accounts receivable and other receivables (456,231) 411,718
Inventories 241,144 (431,680)
Prepaid expenses and other assets (2,573) (120,802)
Increase (decrease) in:
Accounts payable and accrued liabilities (88,118) 249,162
-------------------------- --------------------------

Net cash provided by operating activities 38,011 252,345
-------------------------- --------------------------

Cash flows from investing activities:
Capital expenditures (295,745) (220,516)
Other assets -- (102,568)
Patents and intellectual properties (4,326) (5,000)
-------------------------- --------------------------

Net cash (used in)
investing activities (300,071) (328,084)
-------------------------- --------------------------

Cash flows from financing activities:
Net (payments) under line of credit (30,724) (182,000)
Net proceeds from sale of common stock 143,351 166,543
Proceeds from issuance of debt 500,000 --
Principal payments of long-term debt (60,508) (79,643)
-------------------------- --------------------------

Net cash provided (utilized) by
financing activities 552,119 (95,100)
-------------------------- --------------------------

Net increase (decrease) in cash 290,059 (170,839)
Cash at beginning of year 395,327 339,348
-------------------------- --------------------------

Cash at end of period $ 685,386 $ 168,509
========================== ==========================

See Accompanying Notes

F-4

COLOR IMAGING, INC. AND SUBSIDIARY
NOTES TO INTERIM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 31, 2002
(Unaudited)

NOTE 1. BASIS OF PRESENTATION

The accompanying unaudited interim consolidated condensed financial statements
have been prepared in accordance with accounting principles generally accepted
in the United States of America for interim financial information and with the
instructions to Form 10-QSB. Accordingly, they do not include all of the
information and footnotes required by accounting principles generally accepted
in the United States of America for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring accruals
and adjustments) considered necessary for a fair presentation have been
included. Operating results for the three months ended March 31, 2002 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 2002.

NOTE 2. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are stated at cost. Depreciation of the Company's
property, plant, and equipment is computed using the straight-line method. The
estimated useful lives are as follows:

Years
--------
Leasehold improvements 10 - 20
Machinery and equipment 5 - 20
Furniture and fixtures 7 - 10

NOTE 3. COMMON STOCK

From January 1, 2002 to March 31, 2002, one holder of the Company's warrants
exercised 1,750 warrants on a cashless basis and was issued 705 shares of the
Company's common stock. During March 2002, the Company rescinded one transaction
entered into during 2001 for the sale of 25,000 shares of common stock and
warrants to purchase 25,000 shares of the common stock of the Company. This
transaction was retroactively reflected in the financial statements as of
December 31, 2001. As of March 2002, all notes receivable from sales of Company
securities have been fully paid by the investors.

On October 30, 2001, the Company issued and sold 1,000,000 shares of its common
stock to one investor in exchange for $2 million. The purchase price was $2.00
per share, of which $10,000 was payable in cash and $1,990,000 was payable in
the form of a recourse promissory note. The Company also agreed to issue up to
500,000 warrants exercisable at $2.00 per share to purchase the Company's common
stock. In March 2002, the Company and the investor mutually rescinded this
transaction and the Company has retroactively reflected this rescission as of
December 31, 2001.

NOTE 4. INVENTORIES

Inventories consisted of the following components as of March 31, 2002 and
December 31, 2001:

March 31, 2002 December 31, 2001
------------------ -----------------
Raw materials $ 1,678,500 $ 723,480
Work-in-process 992,586 967,982
Finished goods 3,269,762 4,534,410
Obsolescence allowance (125,950) (169,830)
----------------- -----------------
Total $ 5,814,898 $ 6,056,042
================= =================

NOTE 5. CHANGES TO BORROWING ARRANGEMENTS

The Company has a $2.5 million revolving line of credit with an outstanding
balance as of March 31, 2002 of $1,431,692. At the end of each month for the
following month, the Company has the interest rate option of either the one
month Libor interest rate in effect two business days before the first day of
the month plus 2.50% or the Bank's prime interest rate minus 0.25%. As of March
31, 2002, the interest rate was the one month Libor rate plus 2.50% (6.87%).
This revolving line of credit has a June 30, 2002 expiration date.

F-5

NOTE 5. CHANGES TO BORROWING ARRANGEMENTS (CONTINUED)

Under the lines of credit, the Company is permitted to borrow up to 85% of
eligible accounts receivable and 50 percent of eligible inventories (up to a
maximum of $1.1 million and not to exceed 60 percent of the total outstanding).
The Company has granted the Bank a security interest in all of the Company's
assets as security for the repayment of the lines of credit.

The Bank agreement contains various covenants that the Company is required to
maintain, and as of March 31, 2002 the Company was in compliance with such
covenants.

NOTE 6. SIGNIFICANT CUSTOMERS

In the three month period ended March 31, 2002, two customers accounted for 47%
and 21%, respectively, of net sales. The Company does not have a written or oral
contract with these customers. All sales are made through purchase orders.
Accounts receivable from these customers at March 31, 2002, were $1,462,000 and
$711,000, respectively.

NOTE 7. SIGNIFICANT SUPPLIERS

In the three months ended March 31, 2002, the Company purchased 49% of its raw
materials, components and supplies from one supplier in connection with sales to
its largest customers. At March 31, 2002, the account payable to this supplier
was $2,014,000.

NOTE 8. FINANCIAL REPORTING FOR BUSINESS SEGMENTS:

The Company believes that its operations are in a single industry segment
involving the development and manufacture of products used in electronic
printing. All of the Company's assets are domestic. The sales to unaffiliated
customers by geographic region for the three month period ended March 31 are as
follows:

2002 2001
----------- -----------
Sales to Unaffiliated Customers:
United States $ 5,180,730 $ 5,019,357
Europe 1,568,612 288,813
Asia 175,555 65,181
All Other 934,181 154,965
----------- -----------
Total $ 7,859,078 $ 5,528,316
=========== ===========

F-6

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders Color Imaging, Inc. Norcross, Georgia

We have audited the accompanying consolidated balance sheets of Color Imaging,
Inc. (a Delaware corporation) and subsidiary as of December 31, 2001 and 2000
(as restated - see Note 3), and the related consolidated statements of
operations, stockholders' equity and cash flows for the years then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Color Imaging, Inc.
and subsidiary as of December 31, 2001 and 2000 (as restated - see Note 3), and
the results of their operations and their cash flows for the years then ended in
conformity with accounting principles generally accepted in the Unites States of
America.

LAZAR LEVINE & FELIX LLP

New York, New York
February 15, 2002,
except for the 3rd and 4th
paragraphs of Note 8(A)
the date of which is
March 20, 2002

F-7

COLOR IMAGING, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2001 AND 2000

2000
(AS RESTATED --
2001 SEE NOTE 3)
--------------- ---------------
- ASSETS -
CURRENT ASSETS:
Cash $ 395,327 $ 339,348
Accounts receivable -- net of allowance for doubtful accounts
of $100,000 for 2001 and 2000 3,030,995 3,562,120
Inventories 6,056,042 5,181,248
Deferred taxes 277,239 155,526
Related party portion of IDR bond -- current 79,596 76,032
Other current assets 339,141 401,143
--------------- ---------------
TOTAL CURRENT ASSETS 10,178,340 9,715,417
--------------- ---------------

PROPERTY, PLANT AND EQUIPMENT -- NET 8,438,826 8,256,430
--------------- ---------------

OTHER ASSETS:
Patent/intellectual property 5,000 5,000
Deferred income tax 312,000 467,984
Related party portion of IDR bond 818,500 898,096
Other assets 225,204 269,626
--------------- ---------------
1,360,704 1,640,706
--------------- ---------------
$19,977,870 $ 19,612,553
=============== ===============
- LIABILITIES & STOCKHOLDERS' EQUITY -

CURRENT LIABILITIES:
Revolving credit lines $ 1,462,416 $ 1,399,000
Accounts payable 4,898,665 6,665,322
Current portion of notes payable 369,198 343,408
Current portion of bonds payable 335,000 320,000
Other current liabilities 501,086 370,765
--------------- ---------------
TOTAL CURRENT LIABILITIES 7,566,365 9,098,495
--------------- ---------------

LONG TERM LIABILITIES:
Notes payable 1,359,000 1,698,058
Bonds payable 3,445,000 3,780,000
--------------- ---------------

LONG TERM LIABILITIES 4,804,000 5,478,058
--------------- ---------------

TOTAL LIABILITIES 12,370,365 14,576,553
--------------- ---------------

COMMITMENTS & CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value, authorized 20,000,000 shares;
10,099,175 and 7,490,948 shares issued and outstanding on 100,992 74,909
December 31, 2001 and 2000, respectively
Additional paid-in capital 9,873,939 7,229,293
Stock subscription receivable (149,000) --
Accumulated deficit (2,218,426) (2,268,202)
--------------- ---------------
7,607,505 5,036,000
--------------- ---------------
$19,977,870 $ 19,612,553
=============== ===============

See notes to consolidated financial statements.

F-8

COLOR IMAGING, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000

2001 2000
(AS RESTATED -
SEE NOTE 3)

SALES $ 30,521,167 $12,108,132
COST OF SALES 26,053,501 10,329,418
-------------- ---------------
GROSS PROFIT 4,467,666 1,778,714
-------------- ---------------
OPERATING EXPENSES:
Administrative 1,698,836 889,742
Deferred charge write-off 215,371 --
Research and development 883,115 764,286
Sales and marketing 1,196,458 470,625
-------------- ---------------
3,993,780 2,124,653
INCOME (LOSS) FROM OPERATIONS 473,886 (345,939)
-------------- ---------------
OTHER INCOME (EXPENSE):
Interest and other (expense) 39,183 (147,988)
Interest and financing costs (417,107) (241,037)
Non-recurring moving expenses (9,570) (256,212)
-------------- ---------------
(387,494) (645,237)
-------------- ---------------
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES 86,392 (991,176)
PROVISION (BENEFIT) FOR INCOME TAXES 36,616 (332,792)
-------------- ---------------
NET INCOME (LOSS) $ 49,776 $ (658,384)
============== ===============
INCOME (LOSS) PER COMMON SHARE:
Basic $.01 $(.09)
Diluted $.01 $(.09)

WEIGHTED AVERAGE SHARES OUTSTANDING
OUTSTANDING-BASIC 7,985,071 7,055,763
DILUTED 8,560,369 7,154,136
============== ===============

See notes to consolidated financial statements.

F-9

COLOR IMAGING, INC. AND SUBSIDIARY CONSOLIDATED STATEMENT OF STOCKHOLDERS'
EQUITY FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000

ADDITIONAL STOCK TOTAL
COMMON PAID-IN SUBSCRIPTION ACCUMULATED TOCKHOLDERS'
SHARES STOCK CAPITAL RECEIVABLE DEFICIT EQUITY
------ ----- ------- ---------- ------- ------

Balance at December 31, 1999
(as restated - see Note 3) 3,999,987 $ 40,000 $3,058,241 -- $(1,609,818) $1,488,423

Acquisition of Image 3,000,000 30,000 3,194,039 -- -- 3,224,039

Exercise of stock warrants 46,211 462 91,960 -- -- 92,422

Common stock issued in
private placement 444,750 4,447 885,053 -- -- 889,500

Net loss for the year -- -- -- -- (658,384) (658,384)
------------- ------------ ----------- ------------- ------------- -----------

Balance at December 31, 2000
(as restated - see Note 3) 7,490,948 74,909 7,229,293 -- (2,268,202) 5,036,000

Exercise of stock warrants 55,452 555 110,349 -- -- 110,904

Exercise of stock, warrants,
cashless 1,104,815 11,048 (11,048) -- -- --

Common stock, issued for services 10,000 100 24,900 -- -- 25,000

Common stock, issued in private
placement 1,437,960 14,380 2,520,445 (149,000) -- 2,385,825

Net income for the year -- -- -- -- 49,776 49,776
------------- ------------ ----------- ------------- ------------- -----------

Balance at December 31, 2001 10,099,175 $100,992 $9,873,939 $(149,000) $(2,218,426) $7,607,505
============= ============ =========== ============= ============= ===========

See notes to consolidated financial statements.

F-10

COLOR IMAGING, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000

2000
(AS RESTATED-
2001 SEE NOTE 3)
-------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 49,776 $ (658,384)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 603,100 379,117
Deferred income taxes 34,271 (154,294)
Compensatory shares 25,000 --
Decrease (increase) in:
Accounts and other receivables 718,471 207,672
Inventories (874,794) 683,183
Prepaid expenses and other assets (134,727) 63,065
Due from related party under IDR bond 76,032 81,706
Increase (decrease) in:
Accounts payable and accrued liabilities (1,630,229) 212,450
-------------- -------------
NET CASH (USED IN PROVIDED BY OPERATING ACTIVITIES (1,133,100) 814,515
-------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (785,496) (2,319,955)
Other assets 53,805 (53,805)
Patents and intellectual properties -- (5,000)
-------------- -------------
NET CASH (USED IN) INVESTING ACTIVITIES (731,691) (2,378,760)
-------------- -------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under line of credit 63,416 (644,135)
Proceeds from long-term debt 27,865 500,000
Proceeds from sale of stock 2,496,729 981,922
Principal payments of long-term debt (667,240) (118,068)
-------------- -------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,920,770 719,719
-------------- -------------

NET INCREASE (DECREASE) IN CASH 55,979 (844,526)
Cash at beginning of year 339,348 1,183,874
-------------- -------------

CASH AT END OF YEAR $ 395,327 $ 339,348
============== =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Income taxes $ -- $ --
-------------- -------------
Interest $ 417,107 $ 241,037
============== =============

See notes to consolidated financial statements.

F-11

COLOR IMAGING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000

NOTE 1. DESCRIPTION OF COMPANY:

On May 16, 2000, Color Imaging, Inc., formerly known as Advatex Associates, Inc.
(Advatex), Logical Acquisition Corp. (LAC), Color Acquisition Corp. (CAC),
Logical Imaging Solutions, Inc. (Logical) and Color Image, Inc. (Image) entered
into a Merger Agreement and Plan of Reorganization, as amended (Merger
Agreement), pursuant to which LAC merged with and into Logical and CAC merged
with and into Image (the Merger) and Logical and Image became wholly-owned
subsidiaries of Advatex. Pursuant to the Merger Agreement, stockholders of
Logical and Image exchanged their common stock for shares of common stock of
Advatex. A reverse stock split of one share of common stock for 6.0779 shares of
common stock was simultaneously approved for the then existing Advatex common
stock. Subsequently, the equity interests in Logical were converted by virtue of
the Logical Merger into approximately 3,000,000 newly issued shares of Advatex
common stock, on the basis of 1.84843 Advatex Common Shares for each one share
of common stock of Logical. The equity interests in Image were converted by
virtue of the Image Merger into approximately 3,000,000 newly issued shares of
the Advatex common stock on the basis of 15 Advatex common shares for each one
share of common stock of Image. The above transactions were consummated on June
28, 2000.

Prior to the completion of the above referenced transaction, Advatex was a
non-operating, fully reporting, public shell, and both Logical and Image were
privately owned operating enterprises. By the terms of the Merger Agreement and
Plan of Reorganization, the combination was contingent upon the agreement of all
of the enterprises, and it was, therefore considered a single business
combination.

Image and Logical each received the same number of shares and both the board of
directors and executive officers of the Company were equally divided between the
managements of Logical and Image. However, since the majority of the voting
stock was held by directors coming from Logical or including former Logical
directors, Logical was determined to be the accounting acquirer in the reverse
merger with Advatex, based upon guidance provided by Securities and Exchange
Commission (SEC) Staff Accounting Bulletin (SAB) Topic 2A and APB 16, regarding
Business Combinations.

The fair market value of the shares being issued in the reverse acquisition
transaction could not be determined and accordingly, the transaction was valued
at the fair market value of the issuer's net assets, which approximated their
carrying value. As a result, and consistent with treatment of a merger between a
non-operating public shell and privately held entity, no goodwill was
recognized.

Concurrently with the above transaction, Advatex, the legal acquirer, issued
3,000,000 shares of common stock (with a per share value of $1.00 as determined
in the aforementioned reverse acquisition by Logical of Advatex) in exchange for
the outstanding shares of Image. This transaction was accounted for under the
purchase method of accounting (see Note 3 - Restatement). The fair value of the
Image's assets was reviewed to determine the allocation of the cost of the
purchase to tangible and intangible assets, including goodwill. Management
determined that no adjustment to the financial statements of Image was
necessary, and that the fair value of the tangible and intangible assets of
Image was equivalent to their respective book values and no goodwill was
recognized in this transaction. The historical financial statements are those of
Logical, and the assets, liabilities and operating results of Image are only
included in the consolidated financial statements of the Company from the date
of acquisition, June 28, 2000.

The following unaudited pro forma results of operations were developed assuming
the acquisition had occurred at the beginning of the earliest period presented.

Year Ended December 31,2000
(Unaudited Proforma Data)
-------------------------------

Net sales $ 21,204,435
Net loss (517,934)
Loss per share $ (0.07)

F-12

NOTE 1. DESCRIPTION OF COMPANY (CONTINUED):

On July 7, 2000, by a vote of the majority of stockholders, Advatex Associates,
Inc. (Advatex), changed its name to Color Imaging, Inc. (the Company or Color)
and approved the reverse stock split. On December 31, 2000, Image merged into
Color with Color being the surviving entity. At December 31, 2001, there were
11,124,175 shares of the common stock of the Company issued and outstanding.
During March 2002 two transactions for the sale of 1,025,000 shares of the
Company's common stock were rescinded.

Color develops, manufactures and markets products used in electronic printing
and photocopying. Color designs, manufactures and delivers black text toners,
specialty toners, including color and MICR (magnetic characters used on checks
and other financial documents). Color also supplies other consumable products
used in electronic printing and photocopying, including toner cartridges,
cartridge components, photoreceptors and imaging drums.

Logical's development efforts have focused on creating a digital variable
printing process that provides high-speed, color printing systems for commercial
applications. Logical designs, manufactures and delivers complete printing
systems, including software, control units and print engines to its customers.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

A. PRINCIPLES OF CONSOLIDATION:

The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiary, Logical Imaging Solutions, Inc. All significant
intercompany balances and transactions have been eliminated in consolidation.

B. ESTIMATES AND ASSUMPTIONS:

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America (GAAP) requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

C. FINANCIAL INSTRUMENTS:

The carrying amount of the Company's financial instruments, which include cash
equivalents, marketable securities, accounts receivable, accounts payable and
long-term debt, approximates their fair value at December 31, 2001 and 2000.

D. CONCENTRATION OF CREDIT RISK:

Financial instruments which potentially subject the Company to concentrations of
credit risk are cash equivalents, marketable securities and accounts receivable.
The Company attempts to limit its credit risk associated with cash equivalents
and marketable securities and at December 31, 2001 its investments were in cash
held in highly rated financial institutions. With respect to accounts
receivable, the Company limits its credit risk by performing ongoing credit
evaluations and, when deemed necessary, requiring cash in advance, payment by
credit card, letters of credit or guarantees. The Company's customer base is
comprised principally of domestic distributors, remanufacturers of laser
printing consumable products and commercial printers. Management does not
believe significant risk exists in connection with the Company's concentrations
of credit at December 31, 2001.

E. CASH AND CASH EQUIVALENTS:

The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.

F. INVENTORIES:

Inventories are stated at the lower of cost or market with cost determined by
the first-in, first-out (FIFO) method for raw materials, work-in-process and
finished goods. Costs in inventory include materials, direct labor, and applied
manufacturing overhead.

F-13

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

G. PROPERTY, PLANT AND EQUIPMENT:

Property, plant, and equipment are recorded at cost. Replacements and major
improvements are capitalized; maintenance and repairs are expensed as incurred.
Gains or losses on asset dispositions are included in the determination of net
income.

Depreciation of the Company's property, plant, and equipment is computed using
the straight-line method. The average estimated useful lives are as follows:

Years
--------------
Leasehold improvements 10
Machinery and equipment 5 - 10
Furniture and fixtures 7 - 10

H. INTANGIBLE ASSETS:

Intangible assets are comprised of patents and intellectual property. All
intangible property is amortized by the straight-line method, over their
respective useful lives, commencing upon completion of commercialization.
Intangibles are periodically reviewed to assess recoverability from future
operations using undiscounted cash flows in accordance with SFAS 121,
"Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be
Disposed Of". To the extent carrying values exceed fair values, an impairment
loss is recognized in operating results.

I. STOCK-BASED COMPENSATION:

The Company grants stock options for a fixed number of shares of common stock to
employees with an exercise price equal to the fair value of the common stock at
the date of grant. The Company accounts for stock option grants in accordance
with APB Opinion No. 25, Accounting for Stock Issued to Employees (APB 25) and
related Interpretations because the Company believes the alternative fair value
accounting provided for under FASB Statement No. 123, Accounting for Stock-Based
Compensation, (FAS 123) requires the use of option valuation models that were
not developed for use in valuing employee stock options. Under APB 25, because
the exercise price of the Company"s employee stock options equals the market
price of the underlying stock on the date of grant, no compensation expense is
recognized.

J. INCOME TAXES:

The asset and liability method is used in accounting for income taxes. Under
this method, deferred tax assets and liabilities are recognized for operating
loss and tax credit carry forwards and for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in the results of operations in the period
that includes the enactment date. A valuation allowance is recorded to reduce
the carrying amounts of deferred tax assets unless it is more likely than not
that such assets will be realized.

K. REVENUE RECOGNITION:

Color designs, manufactures and sells toner used in electronic printing. Revenue
from such product sales is recognized when persuasive evidence of an arrangement
exists, delivery has occurred, the fee is fixed or determinable and
collectibility is probable. At this time the earnings process is complete and
the risks and rewards of ownership have transferred to the customer, which is
generally when the goods are shipped and all significant obligations of the
Company have been satisfied. Both Logical and Color supply consumable products
used in electronic printing and revenue from the sale of such consumables is
also recognized when the goods are shipped. Sales of the printing systems
designed and manufactured by Logical have been negligible through December 31,
2001, and accordingly, the Company has not generated revenues from warranty
contracts and/or services provided for installation and maintenance.

F-14

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

K. REVENUE RECOGNITION (CONTINUED):

The Company recognizes revenues in accordance with Staff Accounting Bulletin
101, Revenue Recognition in Financial statements (SAB 101). As a result, the
publication of SAB 101 did not have an impact on the Company's financial
statements.

L. ADVERTISING COSTS:

In accordance with SOP No. 93-7, Reporting on Advertising Costs, the Company
expenses all advertising expenditures as incurred. The Company incurred $57,473
and $33,226 in advertising costs during 2001 and 2000, respectively.

M. RESEARCH AND DEVELOPMENT EXPENSES:

Research and development costs are charged to expense when incurred and
aggregated $883,115 and $764,286 for 2001 and 2000, respectively.

N. EARNINGS (LOSS) PER COMMON SHARE:

Earnings per common share are calculated under the provisions of SFAS No. 128,
Earnings per Share. SFAS No. 128 requires the Company to report both basic
earnings per share, which is based on the weighted-average number of common
shares outstanding, and diluted earnings per share, which is based on the
weighted-average number of common shares outstanding plus all potential dilutive
common shares outstanding. Since the Company reported a loss from operations in
2000, the exercise of stock options and warrants was not assumed since the
result would be antidilutive.

O. FOREIGN CURRENCY TRANSACTIONS:

During 2001, the Company began selling its products in certain overseas markets
where the prices were denominated in Euros. All balance sheet accounts resulting
from foreign transactions are translated into U.S. dollars at the rate of
exchange in effect at the balance sheet date and statements of operations items
are translated at the weighted average exchange rates for the year. The
resulting translation adjustments are made directly to a separate component of
stockholders' equity. Gains and losses from foreign currency transactions, such
as those resulting from the settlement of foreign receivables (or payables) are
included in the consolidated statements of operations. As of December 31, 2001,
there were no material balance sheet items resulting from foreign currency
transactions. Losses from the settlement of foreign receivables aggregated
$1,876 for the year ended December 31, 2001 and is included in other expense on
the statements of operations.

P. DEFERRED CHARGES:

The Company defers certain expenditures related to the activities associated
with the acquisition of business assets, which the Company has determined have a
future economic benefit. These expenditures are then capitalized into the cost
of the assets upon acquisition. Management reviews these assets whenever the
circumstances and situations change such that there is an indication that the
carrying amount is not recoverable. When management's best estimate of the
future economic benefit of these assets is less than the carrying amount, the
carrying amount is reduced to the fair value and a write-off is recognized.
Deferred charges written off are not restored.

At December 31, 2000, the Company had recorded deferred charges aggregating
$53,805 in connection with fees and costs related to the planned acquisition of
a manufacturing business, and, during 2001, incurred additional costs of
$161,566. The Company was not able to consummate this acquisition and, as of
December 31, 2001, wrote off such deferred costs.

Q. NEW ACCOUNTING STANDARDS:

In March 2000, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 44 (FIN 44), Accounting for Certain Transactions involving
Stock Compensation, an Interpretation of APB Opinion No. 25. FIN 44 clarifies
the application of APB No. 25 for certain issues, including the definition of an
employee, the treatment of the acceleration of stock options and the accounting
treatment for options assumed in business combinations. FIN 44 became effective
on July 1, 2000, but is applicable for certain transactions dating back to
December 1998. The adoption of FIN 44 did not have a material impact on the
Company's financial position or results of operations.

F-15

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

Q. NEW ACCOUNTING STANDARDS (CONTINUED):

In December 1999, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin (SAB) No. 101, Revenue Recognition in Financial Statements.
(SAB No. 101). SAB No. 101 expresses the views of the SEC staff in applying
generally accepted accounting principles to certain revenue recognition issues.
Subsequently, SAB Nos. 101A and 101B were issued delaying the implementation of
SAB No. 101 to the fourth quarter of 2000. The SAB requires companies to report
any changes in revenue recognition as a cumulative change in accounting
principle at the time of implementation in accordance with Accounting

Principles Board (APB) Opinion 20, Accounting Changes. The adoption of SAB No.
101 did not have a material impact on the Company's financial position or
results of operations.

New accounting standards issued include SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, which establishes a comprehensive standard
for the recognition and measurement of derivatives and hedging activities. The
new standard requires that all derivatives be recognized as assets or
liabilities in the statement of financial position and measured at fair value.
Gains or losses resulting from changes in fair value are required to be
recognized in current earnings unless specific hedge criteria are met. SFAS No.
133 became effective for the Company beginning in the first quarter of fiscal
year 2001 but has had no impact on the Company's financial statements due to the
Company's limited use of derivatives.

In July 2001, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 141, "Business Combinations" ("SFAS 141")
and Statement of Financial Accounting Standards No. 142, "Goodwill and Other
Intangible Assets" ("SFAS 142"). SFAS 141 requires all business combinations to
be accounted for using the purchase method of accounting and is effective for
all business combinations completed after June 30, 2001. SFAS 142 requires
goodwill to be tested for impairment under certain circumstances, and
written-off when impaired, rather than being amortized as previous standards
required. Furthermore, SFAS 142 requires purchased intangible assets to be
amortized over their estimated useful lives unless these lives are determined to
be indefinite. SFAS 142 is effective for fiscal years beginning after December
15, 2001. The Company is currently assessing the impact of SFAS 142 on its
operating results and financial condition but does not believe it will be
material.

On October 3, 2001, the FASB issued Statement of Financial Accounting Standards
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS
144"), that is applicable to financial statements issued for fiscal years
beginning after December 15, 2001. The FASB's new rules on asset impairment
supercede SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of," and portions of Accounting Principles
Board Opinion 30, "Reporting the Results of Operations". This Standard provides
a single accounting model for long-lived assets to be disposed of and
significantly changes the criteria that would have to be met to classify an
assets as held-for-sale.

F-16

NOTE 3. RESTATEMENT OF YEAR 2000 FINANCIAL STATEMENTS:

The accompanying financial statements for the year ended December 31, 2000, have
been restated to reflect the business combination with Image (see Note 1) under
the purchase method of accounting as opposed to the pooling of interests method,
as previously reported. Accordingly, Image's financial statements are only
consolidated beginning with the date of acquisition, June 28, 2000. In addition,
the Company reclassified certain tangible assets that were erroneously
classified as Patent/Intellectual Property. The following tables present the
impact of the restatement.

As Previously
Reported As Restated
-------- -----------
Year Ended December 31, 2000:
Balance Sheet:
Deferred taxes-- current $159,426 $155,526
Related party portion-- IDR bond, current 100,832 76,032
Property, plant and equipment, net 7,384,679 8,256,430
Patent/intellectual property 876,751 5,000
Deferred income tax, non-current 464,085 467,984
Related party portion-- IDR bond, non-current 873,296 898,096
Accounts payable 6,640,402 6,665,322
Current portion of notes payable 351,150 343,408
Other current liabilities 400,276 370,765
Notes payable-- non-current 1,685,725 1,698,058
Additional paid-in capital 6,986,003 7,229,293
Accumulated deficit (2,024,912) (2,268,202)

As Previously
Reported As Restated
-------- -----------
Year Ended December 31, 2000:
Statement of Operations:
Sales $21,204,435 $12,108,132
Cost of sales 17,946,605 10,329,418
Administrative expenses 1,478,075 889,742
Research and development 1,003,565 764,286
Sales and marketing 881,176 470,625
Interest and other income(expense) 351,062 (147,988)
Interest and financing costs (488,948) (241,037)
Non-recurring moving expenses (488,854) (256,212)
Benefit for income taxes (213,792) (332,792)
Net loss (517,934) (658,384)
Basic and diluted loss per share $(.07) $(.09)

See also Note 1 -- Unaudited Proforma Data

NOTE 4. INVENTORIES:

Inventories consisted of the following components as of December 31, 2001 and
2000:

2001 2000
-------- -----------
Raw materials $723,480 $794,128
Work-in-process 967,982 1,275,545
Finished goods 4,534,410 3,234,230
Obsolescence allowance (169,830) (122,655)
------------- -----------
Total $6,056,042 $5,181,248

F-17

NOTE 5. PROPERTY AND EQUIPMENT:

Property and equipment consisted of the following as of December 31, 2001 and
2000:

2001 2000
----------- -----------
Furniture and fixtures $132,310 $129,955
Test equipment 456,152 412,325
Manufacturing machinery and equipment 7,588,035 6,865,206
Leasehold improvements 1,268,506 1,252,021
----------- -----------
9,445,003 8,659,507
Less: accumulated depreciation and amortization (1,006,177) (403,077)
----------- -----------
$8,438,826 $8,256,430
=========== ===========

Depreciation and amortization expense amounted to $603,100 and $379,117 in 2001
and 2000, respectively.

NOTE 6. BORROWING ARRANGEMENTS:

As a condition of its Bank's consent to the business combination (see Note 1),
the Company, on August 30, 2000, entered into an amended and restated borrowing
arrangement, granting to the bank a security interest in all of the Company's
assets as security for the payment of the obligations owed the bank.

The Company has a $2.5 million revolving line of credit with an outstanding
balance as of December 31, 2001 of $1,462,416, which bears interest at the rate
of 4.75% (the one-month libor of 2.25% plus 2.5%) as of December 31, 2001. The
revolving line of credit has a June 30, 2002 expiration date. Under the line of
credit, the Company is permitted to borrow 85% of eligible accounts receivable
and 50% of eligible inventories (up to a maximum of $1.1 million).

The Bank agreement contains various covenants that the Company is required to
maintain; fixed charge and cash flow leverage ratios of not less than 1.20:1 and
not greater than 4.00:1, respectively. As of December 31, 2001, the Company was
not in compliance with these covenants and received a waiver from the bank as
regards these requirements for the period ending December 31, 2001. On February
7, 2002, the bank approved a modification to these covenants to a fixed charge
and cash flow coverage leverage ratios of not less than 1.05:1 and not greater
than 5.00:1, respectively. The Company is in compliance with these new
covenants.

Long-term debt was comprised of the following as of December 31:
2001 2000
---- ----
Term note payable to a financial institution due in monthly installments of
principal and interest of $848 through March 2003; bears interest at 8.0%,
collateralized by automobile with a net book value of $26,386 $ 12,021 $20,810

Term note payable to a financial institution due in monthly installments of
principal and interest of $10,676 through November 2005; bears interest at
10.215%; collateralized by inventory, accounts receivable and equipment 419,245 500,000

Term note payable to a financial institution in monthly installments of
principal and interest of $27,205 through June 2006 bears interest at
7.90%; collateralized by inventory, accounts receivable and equipment (see
Note 7) 1,234,755 1,444,105

Various equipment notes maturing in 2006 62,177 76,551
----------- ----------
1,728,198 2,041,466
Less current maturities 369,198 343,408
----------- ----------
$1,359,000 $1,698,058
=========== ==========

F-18

NOTE 6. BORROWING ARRANGEMENTS (CONTINUED):

The aggregate scheduled maturities of long-term debt for each of the next five
years are as follows:

2002 $369,198
2003 366,423
2004 396,511
2005 428,542
2006 167,524
-----------
Total $1,728,198
===========

NOTE 7. INDUSTRIAL DEVELOPMENT REVENUE BOND:

On June 1, 1999, the Development Authority of Gwinnett County (the Authority),
issued $4,100,000 of industrial development revenue bonds on behalf of the
Company and a Related Party. The 3.5% revenue bonds are payable in varying
annual principal and monthly interest payments through July 2019. The bond is
secured by all the assets of the Company and by real property owned by the
Related Party. The bonds along with the line of credit and term loan (see Note
6) are held by two related financial institutions.

A loan agreement between the Authority and the Company and a Related Party
allows funds to effectively pass through the Authority to the Company. The
majority of the proceeds, $3,125,872, were used by the Company to purchase and
install certain manufacturing equipment, while $974,128 was used by the Related
Party to pay down the mortgage on the real property leased to the Company. The
Company and the Related Party are jointly obligated to repay any outstanding
debt. Under the Joint Debtor Agreement of June 28, 2000, between the Company and
the Related Party, each has agreed to be responsible to the other for their
share of the bond obligations and that any party causing an act of default shall
be responsible for 100% of the bond obligations. The amount for which the
Related Party is responsible to the Company is reflected in current and other
assets of the Company. The Related Party amounts owed to the Authority are
secured by a lien on the real property leased by the Company and by personal
guarantees executed by members of the Related Party. At this time, the Company
believes that the Related Party portion of the bond is fully collectible. As of
December 31, 2001, the bond principal outstanding was $3,780,000 and the portion
due from the Related Party was $898,096.

The aggregate maturities of bonds payable for each of the next five years are as
follows:

Company Related Party Total
------- ------------- -----

2002 $254,600 $80,400 $335,000
2003 266,000 84,000 350,000
2004 281,200 88,800 370,000
2005 296,400 93,600 390,000
2006 307,800 97,200 405,000
Thereafter 1,475,904 454,096 1,930,000
---------- --------- ------------
Total $2,881,904 $898,096 $3,780,000
========== ========= ============

NOTE 8. STOCKHOLDERS EQUITY:

A. COMMON STOCK AND STOCK WARRANTS:

As discussed in Note 1, the Company issued an aggregate of 6,000,000 shares of
its common stock to the stockholders of Logical and Image in exchange for their
shares in Logical and Image in a merger transaction. Simultaneously, in 2000,
the Company effected a reverse stock split of one for 6.0779 shares of common
stock.

As part of the Merger, the Company granted warrants (the New Warrant) to
purchase up to 100,000 shares of the common stock of the Company to professional
advisors to the Merger. The New Warrant entitles the warrant holder to purchase,
at any time and for a five-year period, a share of common stock of the Company
for $2.00 per share. In addition, current stockholders at December 31, 2001, own
225,507 similar warrants (the Old Warrant). The Old Warrant entitles the warrant
holder to purchase, at any time until September 15, 2002, a share of common
stock of the Company for $2.70 per share. As of December 31, 2001 and 2000, the
Company had received $110,905 and $92,421, respectively, in proceeds from the
exercise of Old Warrants.

F-19

NOTE 8. STOCKHOLDERS' EQUITY (CONTINUED):

A. COMMON STOCK AND STOCK WARRANTS (CONTINUED):

The Company issued Units consisting of common stock and common stock underlying
warrants to investors in a private placement approved by the Board of Directors
on August 29, 2000. Each Unit in the private placement was priced at $2.00 and
consisted of one common share of the Company's common stock and one warrant to
purchase one share of common stock at an exercise price of $2.00. An additional
warrant to purchase common stock of the Company, for each Unit purchased in the
private placement, was issued to subscribers, at no additional cost, whose
investment(s) aggregated at least $300,000. The warrants expire November 30,
2003. During 2001, the Company issued and sold 1,437,960 Units for a total of
$2,925,920 in cash and notes receivable. The Company also issued, at no
additional cost, 1,312,960 additional warrants during this same period. In March
2002, subsequent to the balance sheet date, the Company rescinded one
transaction entered into during 2001 for the sale of 25,000 shares of common
stock and warrants to purchase 25,000 shares of the common stock of the Company.
This transaction has been retroactively reflected in the financial statements as
of December 31, 2001. The Company paid fees of $59,520 in connection with the
private placement. Additionally, the Company issued 129,837 warrants to finders
to purchase the Company's common stock at an exercise price of $2.00. During
2001, holders of the Company's warrants exercised 2,462,500 warrants on a
cashless basis and received 1,104,815 shares of the Company's common stock. No
underwriting discounts or commissions were paid to any person. As of March 12,
2002, all notes receivable have been fully paid by the investors.

On October 30, 2001, the Company issued and sold 1,000,000 shares of its common
stock to one accredited investor in exchange for $2 million. The purchase price
was $2.00 per share, of which $10,000 was payable in cash and $1,990,000 was
payable in the form of a recourse promissory note, payable at the earlier to
occur of (i) six months after the registration statement covering the shares is
declared effective or (ii) twelve months from the date of the purchase
agreement. The Company also agreed to issue up to 500,000 warrants to purchase
its common stock to the investor in the event it resells the shares at a
purchase price of at least $2 per share. These warrants are exercisable for one
year at an exercise price of $2 per share. In March 2002, when the shares could
not be registered with the Securities and Exchange Commission while the
promissory note was unpaid, the Company and the investor mutually rescinded this
transaction and the Company has retroactively reflected this rescission as of
December 31, 2001.

B. STOCK OPTIONS:

After the Merger, on June 28, 2000, the Company granted options to acquire
500,000 shares of the common stock of the Company to senior members of the
Company's management at an exercise price of $2.00 per share. The options vest
over a two to four year period and expire 5 years from their respective date of
vesting.

The Company granted options to acquire 710,000 shares of the common stock of the
Company to employees, officers and directors at an exercise price of $2.75 per
share during the year ended December 31, 2001. 535,000 options were granted to
officers and employees of which 25% vested immediately and the remainder vest
over 3 years. The officer and employee options expire 5 years from their
respective date of vesting. Each outside director of the Company was granted
options to acquire 25,000 shares of the common stock of the Company, for a total
of 175,000 options, effective upon his or her election or appointment to the
board of directors. The outside director options vest over 5 years, beginning
with the first anniversary date of his or her appointment to the board, and
expire 3 years from their respective date of vesting.

Pro forma information regarding net income and earnings per share is required by
Financial Accounting Standards Board Statement 123, and has been determined as
if the Company had accounted for its employee stock options under the fair value
method of that Statement.

The fair value for these options was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted-average
assumptions for 2001 and 2000, respectively, risk-free interest rate of 4.51%
and 6.02%, dividend yield of 0% and 0%, volatility factor of the expected market
price of the Company's common stock of .26 and .49, and a weighted-average
expected life of the option of 3 years.

The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options, which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management"s
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.

F-20

NOTE 8. STOCKHOLDERS' EQUITY (CONTINUED):

B. STOCK OPTIONS (CONTINUED):

For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. The Company's pro
forma information follows:

2001 2000
---- ----
Pro forma net income (loss) $3,021 $(840,587)
Pro forma loss per common share:
Basic .00 (.12)
Diluted .00 (.12)

A summary of the Company's stock option activity, and related information for
the year ended December 31 follows:

2001 2000
------------------------- -----------------------------
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
------------- --------- ------------- -------------
Outstanding, beginning of year 500,000 $ 2.00 -- $ --
Granted 710,000 2.75 500,000 2.00
Exercised -- -- -- --
------------- --------- ------------- -------------
Outstanding, end of year 1,210,000 2.44 500,000 2.00
Exercisable, end of year 503,750 2.21 250,000 2.00
Weighted average fair value of
options granted during the year $ 1.98 $ 1.85

The weighted-average remaining contractual life of these options is 4.8 years.

C. RETAINED EARNINGS:

The Company is limited in its ability to declare and pay dividends by the terms
of certain debt agreements.

NOTE 9. PENSION PLANS AND POSTRETIREMENT BENEFITS:

The Company has adopted the Color Image, Inc. Profit Sharing Retirement Plan.
Under this defined contribution plan, employees with one year or more of service
who have worked at least 1,000 hours and have reached age 21 are eligible for
participation. Participants may contribute between 1% and 15% of their
compensation as basic contributions. The Company will match 50% of the first 3%
deferred by any participant. Company contributions vest from 20% in the second
year of service to 100% in the sixth year. For the years ended December 31, 2001
and 2000, the Company incurred expenses of $24,355 and $9,940, respectively.

NOTE 10. RELATED-PARTY TRANSACTIONS:

A. LEASE

The Company leases certain facilities under a ten-year real property lease
agreement from Kings Brother LLC. (the Related Party -- see Note 7) which
expires on April 30, 2009. The rental payments for the periods ending December
31, 2001 and 2000 were $505,836 and $186,427, respectively. See also Note 12.

B. PURCHASES

The Company purchases copier and laser printer products from an entity in which
three directors have a beneficial ownership interest. Purchases for the 2001 and
2000 years aggregated approximately $4,005,500 and $435,500 respectively. See
also Note 14.

F-21

NOTE 11. INCOME TAXES:

The provision for income taxes is composed of the following

2001 2000
---------- -----------
Current:
Federal $ 30,000 $ (358,157)
State 16,870 (79,730)
Deferred:
Federal (20,130) 78,917
State 9,876 26,178
---------- ------------
$ 36,616 $ (332,792)
========== ============

The components of the net deferred income tax asset as of December 31, 2001 and
2000, are as follows:

2001 2000
---------- -----------
Deferred tax assets:
Inventory $ 165 $ 65,602
Accounts receivable 38,340 35,980
Accrued expenses 62,861 58,313
Federal tax credits 172,405 195,915
Net operating loss carryforward 491,074 537,600
---------- -----------
764,845 893,410
Valuation allowance for deferred tax assets (53,760) (90,000)
---------- -----------
711,085 803,410
Deferred tax liabilities:
Fixed assets (121,846) (179,900)
---------- -----------
Net deferred tax asset $ 589,239 $ 623,510
========== ===========

At December 31, 2001, the Company has recorded a net deferred tax asset of
$589,239 which is reflected in Current Assets and Other Assets in the
consolidated balance sheet. Realization of the asset is dependent on generating
sufficient taxable income in future periods. The Company had experienced
operating losses for 2000 and 1999 years. A significant portion of the loss
sustained in 2000 was a result of non-recurring moving expenses and management
does not foresee any like charges for the next few years. The Company has
taxable income for the 2001 and projects taxable income for 2002, as such, the
Company believes that it is more likely than not that a substantial portion of
the deferred tax asset will be realized, and consequently, has established a
valuation allowance of only $53,760 as of December 31, 2001.

At December 31, 2001, the Company had net operating loss carryforwards (NOLs) of
$491,074 for income tax purposes that expire in years beginning 2020.

The reconciliation of income tax computed at the U.S. federal statutory tax
rates to income tax expense attributable to income before cumulative effect of
accounting changes is:

2001 2000
--------- ---------
Tax at U.S. statutory rates 34.00% (34.00)%
State income taxes net of federal tax benefit 6.16 (4.26)
Other-net (2.22) 4.69
--------- ---------
42.38% (33.57)%
========= =========

F-22

NOTE 12. COMMITMENTS AND CONTINGENCIES:

A. LEASES:

The Company currently leases approximately 180,000 square feet in Norcross,
Georgia that serves as executive headquarters and houses manufacturing
facilities, research and development and sales and marketing under a lease that
expires April 2009. The lease includes three options to extend the term for five
years each, and contains provisions for annual rent increases through each term.
The Company also leases approximately 4,000 square feet in Santa Ana, California
under a month-to-month lease at the monthly rental rate of $3,072.

Minimum lease commitments are as follows:

2002 $518,481
2003 531,444
2004 544,730
2005 558,348
2006 572,307
Thereafter 1,958,285
-----------
Total minimum lease payments $ 4,683,595
===========

Rental expense aggregated $545,360 and $229,601 for 2001 and 2000, respectively.

B. EMPLOYMENT AGREEMENTS:

On June 28, 2000, the Company entered into employment agreements with its Chief
Executive Officer, Michael W. Brennan, President, Dr. Sueling Wang, Executive
Vice President and Chief Financial Officer, Morris E. Van Asperen, and Vice
President of Marketing and Sales Charles R. Allison. All four of the employment
agreements have a 5 year term. The Company is obligated to pay Mr. Brennan and
Dr. Wang annual salaries of $150,000 with a guaranteed increase of 5% per annum
over the term of the agreements. The Company is obligated to pay Mr. Van Asperen
an annual salary of $144,000 with a guaranteed increase of 5% over the term of
his agreement. In addition to commissions earned under the Company's sales
incentive program, the Company is obligated to pay Mr. Allison an annual salary
of $89,250 with a guaranteed increase of 5% per annum over the term of his
agreement. Each employee may terminate the agreement upon 6 months notice to the
Company. The Company may terminate each employee upon 6 months notice by the
Company; provided, however, that the Company is obligated to pay to the employee
his annual base salary, commissions or bonuses earned, and benefits for a period
of 12 months after the date of such notice.

The employment agreements with the above named officers also commits the Company
to purchasing for their benefit certain life insurance plans. For the year ended
December 31, 2001, the Company did not have in place for either Mr. Brennan or
Mr. Van Asperen such supplemental life insurance plans. The Company owns and is
the beneficiary of a life insurance policy on Mr. Allison and maintains it to
fund the deferred compensation agreement with Mr. Allison. Upon Mr. Allison's
retirement, he, or his beneficiaries, are to receive 120 monthly payments of
$2,000 per month or, as provided, the net present value of any unpaid amounts.
The life insurance premiums paid by the Company to fund Mr. Allison's deferred
compensation agreement in 2001 and 2000 were $21,977 and $11,238, respectively.
The Company pays the premiums and is the collateral assignee of four split
dollar life insurance policies owned by Dr. Wang. Pursuant to the policies the
Company will, upon his death or earlier liquidation of each such policy, be
entitled to the refund of all premium payments made by the Company on the
policies, and the balance of the proceeds will be paid to Mr. Wang's designated
beneficiaries. The split dollar life insurance premiums were $13,526 and $8,253
during 2001 and 2000, respectively. The monies due from Dr. Wang in connection
with these life insurance policies at the years ended December 31, 2001 and 2000
was $112,103 and $98,578, respectively.

NOTE 13. SIGNIFICANT CUSTOMERS:

For the year ended December 31, 2001, three distributors/customers of imaging
supplies accounted for 41%, 16% and 12% of net sales. For the year ended
December 31, 2000, a reseller of imaging accounted for 57% of net sales. The
Company does not have a written or oral contract with any of these customers.
All sales are made through purchase orders.

F-23

NOTE 14. SIGNIFICANT SUPPLIERS:

For the years ended December 31, 2001 and 2000, the Company purchased 51% and
38%, respectively, of its raw materials, components and supplies from one
supplier in connection with the sale of both printer and copier products. See
also Note 10 B.

NOTE 15. FINANCIAL REPORTING FOR BUSINESS SEGMENTS:

2001 2000
------------ ------------
Sales to Unaffiliated Customers:
United States $23,030,483 $10,887,281
Europe 5,260,825 744,098
Asia 647,146 375,020
All Other 1,582,713 101,733
------------ ------------
Total $30,521,167 $12,108,132
============ ============

F-24

No dealer, salesperson or other person has been authorized to give any
information or to make any representations not contained in this prospectus in
connection with the offering covered by this prospectus. If given or made, such
information or representations must not be relied upon as having been authorized
by Color Imaging, Inc., a selling stockholder, or any underwriter. This
prospectus does not constitute an offer to sell, or a solicitation of any offer
to buy, common stock in any jurisdiction to any person to whom, it is unlawful
to make such an offer or solicitation in such jurisdiction. Neither the delivery
of this prospectus nor any sale made under this prospectus shall, under any
circumstances, create any implication that the information contained in this
prospectus is correct as of any time after the date of the prospectus or that
there has been no change in the affairs of Color Imaging, Inc. after the date of
this prospectus.

COLOR IMAGING, INC.

UP TO
3,500,000 UNITS OF COMMON STOCK AND WARRANTS

7,000,000 SHARES

AND

3,959,487 SHARES OFFERED

SELLING STOCKHOLDERS
-------------

PROSPECTUS
-------------

May ____, 2002

PART II

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the Delaware General Corporation Law authorizes a corporation
generally to indemnify any person ("indemnitee") who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding (other than an action by or in the right of the corporation)
by reason of the fact that such person is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation, in a similar position with another corporation or entity, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if such person acted in good faith and in a manner
such person reasonably believed to be in or not opposed to the best interests of
the corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe such person's conduct was unlawful. With respect to
actions or suits by or in the right of the corporation, however, an indemnitee
who acted in good faith and in a manner such person reasonably believed to be in
or not opposed to the best interests of the corporation is generally limited to
attorneys' fees and other expenses, and no indemnification shall be made if such
person is adjudged liable to the corporation unless and only to the extent that
a court of competent jurisdiction determines that indemnification is
appropriate. Section 145 further provides that any indemnification shall be made
by the corporation only as authorized in each specific case upon a determination
by the (i) stockholders, (ii) board of directors by a majority vote of directors
who were not parties to such action, suit or proceeding or (iii) independent
counsel, that indemnification of the indemnitee is proper because such has met
the applicable standard of conduct. Section 145 provides that indemnification
under its provisions is not exclusive of other rights of indemnification to
which a person may be entitled under any by-law, agreement, vote of stockholders
or disinterested directors or otherwise.

Our Certificate of Incorporation provides that we will indemnify, to the fullest
extent permitted by law, any person or such person's heirs, executors and
administrators who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that such
person is or was a director, officer, employee or agent of our company, or is or
was serving at the our request as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, or other enterprise,
domestic or foreign, against expenses, attorneys' fees, court costs, judgments,
fines, amounts paid in settlement and other losses actually and reasonably
incurred by such person in connection with such action, suit or proceeding.

The Certificate of Incorporation also provides that none of our directors will
be personally liable to us or our stockholders for monetary damages for any
breach of fiduciary duty by such a director as a director other than for: (i)
any breach of the director's duty of loyalty to us or our stockholders, (ii)
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) liability under Section 174 of the General
Corporation Law of Delaware, or (iv) any transaction from which such director
derived an improper personal benefit.

ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth an itemized estimate of fees and expenses payable
by the registrant in connection with the offering described in this registration
statement:

SEC registration fee......................................................$2,425

Counsel fees and expenses................................................$85,000

Accounting fees and expenses.............................................$10,000

Blue Sky fees and expenses................................................$3,000

Printing expenses........................................................$10,000

Placement agent, broker-dealer or similar fees..........................$175,000

Miscellaneous.............................................................$4,575

Total...................................................................$290,000
--------

All of the above expenses will be paid by the registrant.

II-1

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES

From October 22, 2000 through December 24, 2001, we sold 1,882,710 Units at
$2.00 per Unit to less than 35 purchasers in a private placement raising
$3,765,420. Each Unit consisted of one share of our common stock and one warrant
to purchase one share of our common stock for $2.00. We also issued 1,312,960
additional warrants at no cost to investors in our private placement whose
aggregate investment was at least $300,000 which includes 12,960 warrants issued
to one investor for services rendered in connection with the private placement.
Through May 24, 2002, a total of 2,464,250 warrants have been exercised on a
cashless basis and we have in turn issued 1,105,520 shares of our common stock.
The issuance of the shares and warrants to purchase our common shares was exempt
from registration pursuant to the provisions of Section 4(2) of the Securities
Act of 1933.

On June 11, 2001, we issued 10,000 shares of our common stock to The Blaine
Group, Inc. as consideration for $25,000 in services. The issuance of the shares
and warrants to purchase our common shares was exempt from registration pursuant
to the provisions of Section 4(2) of the Securities Act of 1933.

In June 2000, Color Imaging, Inc. (formerly known as Advatex Associates, Inc.)
in connection with the merger described in the prospectus issued 3,000,000
shares of our common stock to the stockholders of Color Image, Inc. in exchange
for 200,000 shares of Color Image, Inc. (Image) common stock and 3,000,000
shares of our common stock to the stockholders of Logical Imaging Solutions,
Inc. (Logical) in exchange for 1,622,999 shares of common stock of Logical. We
also issued to G-V Capital Corp., advisers to the merger, 100,000 shares of our
common stock and warrants to purchase 100,000 shares of our common stock at an
exercise price of $2.00, expiring July 10, 2005. Additionally, we issued, in
connection with the merger, warrants to purchase 271,719 shares of our common
stock at an exercise price of $2.70 per share in exchange for warrants to
purchase 147,000 shares of Logical's common stock at an exercise price of $5.00.
The issuance of our common stock and the common stock upon warrant exercise in
connection with these transactions was exempt from the registration provisions
of the Act pursuant to Section 4(2) thereof.

II-2

ITEM 27. EXHIBITS

Exhibit No. Description
----------- -----------

2.1 Merger Agreement and Plan of Reorganization dated May 16, 2000, by and
between Advatex Associates, Inc., Logical Acquisition Corp., Color
Acquisition Corp., Logical Imaging Solutions, Inc., and Color Image,
Inc., incorporated by reference to the Registrant's Form 8-K filed on
July 17, 2000.
2.2 Amendment No. 1 to the Merger Agreement and Plan of Reorganization
dated June 15, 2000, incorporated by reference to the Registrant's
Form 8-K filed on July 17, 2000
2.3 Amendment No. 2 to the Merger Agreement and Plan of Reorganization
dated June 26, 2000, incorporated by reference to the Registrant's
Form 8-K filed on July 17, 2000
3.1 Certificate of Incorporation, incorporated by reference to the
Registrant's Form 10-QSB for the quarter ended March 31, 2002.
3.2 Bylaws, incorporated by reference to the Registrant's Form 10-QSB for
the quarter ended March 31, 2002.
4.1 Stock Purchase Agreement between the Company and Wall Street
Consulting Corp. dated October 30, 2001
4.2 Promissory Note of Wall Street Consulting Corp. dated October 30, 2001
4.3* Form of Warrant issued to Selling Stockholders
4.4 Loan and Security Agreement between the Company and Southtrust Bank
dated May 5, 2000
4.5 Amendment of Loan Documents between the Company and SouthTrust Bank
dated August 30, 2000
4.6 Second Amendment of Loan Documents between the Company and SouthTrust
Bank dated November 30, 2000
4.7 Third Amendment of Loan Documents between the Company and SouthTrust
Bank dated June 30, 2001
4.8 Fourth Amendment of Loan Documents between the Company and SouthTrust
Bank dated November 1, 2001
4.9 Fifth Amendment of Loan Documents between the Company and SouthTrust
Bank dated December 31, 2001
4.10* Sixth Amendment of Loan Documents between the Company and Southtrust
Bank dated February 7, 2002
4.11 $500,000 Line of Credit Promissory Note issued to Southtrust Bank
dated May 5, 2000
4.12 $500,000 Amended and Restated Line of Credit Promissory Note issued to
Southtrust Bank dated August 30, 2000
4.13* $500,000 Revolving Note Modification Agreement dated November 30, 2000
4.14 $500,000 Second Revolving Note Modification Agreement dated July 5,
2001
4.15 $1,500,000 Revolving Note between the Company and SouthTrust Bank
dated June 24, 1999
4.16* $1,500,000 Revolving Note Modification Agreement between the Company
and SouthTrust Bank dated May 5, 2000
4.17 $1,500,000 Second Revolving Note Modification Agreement between the
Company and SouthTrust Bank dated August 30, 2000
4.18 $1,500,000 Third Revolving Note Modification Agreement between the
Company and SouthTrust Bank dated November 30, 2000
4.19 $1,500,000 Fourth Revolving Note Modification Agreement between the
Company and SouthTrust Bank dated July 5, 2001
4.20 $2,500,000 Fifth Revolving Note Modification Agreement between the
Company and SouthTrust Bank dated December 31, 2001
4.21 $1,752,000 Installment Note between the Company and SouthTrust Bank
dated June 24, 1999
4.22 $1,752,000 Term Loan Documents Modification Agreement between the
Company and SouthTrust Bank dated August 30, 2000
4.23* SouthTrust Bank waiver letter dated March 26, 2001
4.24* SouthTrust Bank waiver letter dated May 8, 2001
4.25* SouthTrust Bank waiver letter dated August 13, 2001
4.26* SouthTrust Bank waiver letter dated October 31, 2001
4.27 Development Authority of Gwinnett County, Georgia Industrial
Development Trust Indenture dated June 1, 1999
4.28 Loan Agreement between the Company, Kings Brothers LLC and the
Development Authority of Gwinnett County, Georgia dated June 1, 1999

II-3

Exhibit No. Description
----------- -----------

4.29* Joint Debtor Agreement dated June 28, 2000 by and among Color Image,
Inc., Kings Brothers, LLC, Dr. Sueling Wang, Jui-Chi Wang, Jui-Kung
Wang, and Jui-Hung Wang
4.30* First Amendment to Joint Debtor Agreement dated January 1, 2001 by and
among the Company, Kings Brothers, LLC, Dr. Sueling Wang, Jui-Chi
Wang, Jui-Kung Wang, and Jui-Hung Wang
4.31* Master Security Agreement between the Company and General Electric
Capital Corporation dated November 30, 2000
4.32* Promissory Note issued to General Electric Capital Corporation dated
November 30, 2000
4.33* $200,000 Promissory Note between the Company and Kings Brothers LLC
dated November 19, 2001
4.34* $500,000 Promissory Note between the Company and Sueling Wang dated
March 14, 2002
4.35* $240,000 Promissory Note between the Company and Kings Brothers LLC
dated July 6, 2000.
4.36* $50,000 Promissory Note between the Company and Daniel Wang dated
October 23, 1998.
4.37* $112,000 Promissory Note between the Company and Daniel Wang dated
October 16, 1998.
4.38* $90,000 Promissory Note between the Company and Michael Wang dated
June 4, 1999.
4.39* $150,000 Promissory Note between the Company and AccuRec LLC dated
February 3, 2000.
4.40* $200,000 Promissory Note between the Company and AccuRec LLC dated
March 7, 2000.
4.41* $200,000 Promissory Note between the Company and AccuRec LLC dated
April 10, 2000.
4.42* $200,000 Promissory Note between the Company and AccuRec LLC dated May
2, 2000.
4.43* $500,000 Promissory Note between the Company and AccuRec LLC dated
July 5, 2000.
4.44* $200,000 Promissory Note between the Company and AccuRec LLC dated
September 14, 2000.
4.45* $200,000 Promissory Note between the Company and AccuRec LLC dated
October 4, 2000.
4.46* $200,000 Promissory Note between the Company and AccuRec LLC dated
November 3, 2000.
5 Form of Opinion of Arnall Golden Gregory LLP regarding legality.
10.1* Employment Agreement between the Company and Michael W. Brennan dated
June 28, 2000
10.2* Employment Agreement between the Company and Dr. Sueling Wang dated
June 28, 2000
10.3* Employment Agreement between the Company and Morris E. Van Asperen
dated June 28, 2000
10.4* Employment Agreement between the Company and Charles R. Allison dated
June 30, 2000
10.5* Lease Agreement between the Company and Kings Brothers LLC dated April
1, 1999
10.6* Amendment No. 1 to Lease Agreement between the Company and Kings
Brothers LLC dated April 1, 1999
10.7 Form of Warrant Agreement.
21.1 Subsidiary of Registrant.
23.1 Consent of Arnall Golden Gregory LLP. (included as part of Exhibit 5
hereto)
23.2* Consent of Lazar Levine & Felix LLP
24* Power of Attorney (included as part of the signature page hereto).
99.1* Report of Grant Thornton LLP for the Company's fiscal year ended
December 31, 1999
99.2* Rescission Agreement between Joe Daley & Sons, Inc. and the Company
dated March 20, 2002
99.3* Rescission Agreement between Wall Street Consulting Corp. and the
Company dated March 19, 2002

* Previously filed

ITEM 28. UNDERTAKINGS

The undersigned registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:

(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20 percent change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the effective
registration statement;

II-4

(iii)To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;

(2) That, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of
the offering.

(4) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions described in Item 24, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.

II-5

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form SB-2 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Norcross, State of Georgia, on this 28th day of May,
2002.

Color Imaging, Inc.

By: /s/ Michael W. Brennan
---------------------------------
Michael W. Brennan, Chief Executive
Officer

Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed below by the following persons in the capacities and
on the dates indicated.

SIGNATURE TITLE DATE
------------------------------------------- ------------------------------------------ ---------------------------

/s/ MICHAEL W. BRENNAN Chairman of the Board and Chief May 28, 2002
------------------------------------------- Executive Officer (Principal
Michael W. Brennan Executive Officer)

* President, Chief Operating Officer May 28, 2002
------------------------------------------- and Vice-Chairman of the Board
Sueling Wang, PhD

/S/ MORRIS E. VAN ASPEREN Executive Vice president, Chief May 28, 2002
------------------------------------------- Financial Officer (Principal
Morris E. Van Asperen Financial and Accounting Officer),
Secretary and Director

* Vice President and Director May 28, 2002
-------------------------------------------
Charles R. Allison

* Director May 28, 2002
-------------------------------------------
Edwin C. St. Amour

* Director May 28, 2002
-------------------------------------------
Robert L. Langsam

* Director May 28, 2002
-------------------------------------------
Jui-Chi Wang

* Director May 28, 2002
-------------------------------------------
Jui-Kung Wang

* Director May 28, 2002
-------------------------------------------
Jui-Hung Wang

* Director May 28, 2002
-------------------------------------------
Victor A. Hollander

/s/ MICHAEL W. BRENNAN
-------------------------------------------
Attorney-in-fact

/s/ MORRIS E. VAN ASPEREN
-------------------------------------------
Attorney-in-fact