AFP Imaging Reports Record Profitable Third Quarter and Nine Month Results for Fiscal Year Ending June 30, 2005.

ELMSFORD, N.Y. -- AFP Imaging Corporation (OTCBB: AFPC) today reported recent record sales and earnings for the third quarter and nine months ended March 31, 2005.

--Net Revenues increased 14% for the quarter and 20% for the nine months,

--Income from Operations increased 34% for the quarter and Adjusted Income from Operations increased 26% for the nine months.

Net revenues for the third quarter were $6.24 million, an increase of $.76 million or 14%, compared to $5.48 million in the same period last year. Net revenues for the nine months ended March 31, 2005 were $16.98 million, an increase of $2.8 million or 20%, compared to $14.19 million in the same period last year. The third quarter revenues were the highest quarterly revenues in four years.

Income from Operations for the third quarter was $663,300, an increase of $167,300 or 34%, compared to $496,000 for the same period last year. Adjusted Income from Operations for the nine months ended March 31, 2005 was $1,451,967, an increase of $297,800 or 26%, compared to $1,154,100 in the same period last year. Adjusted Income from Operations was calculated by excluding charges, related to the settlement of environmental lawsuits, from Operating Income, which had been incurred in the first and second quarters of Fiscal 2005.

David Vozick, Chairman said, "Management is extremely pleased to report the Company's continued, favorable performance. The positive trends of the past two years reflect the successful implementation of our strategic plan. AFP will continue to aggressively seek out product line development opportunities through both organic growth and acquisitions. Investment in Research and Development and other related technologies is an additional opportunity to expand our product lines for the benefit of our distribution network and medical and dental professionals."

As noted above, during the second quarter Fiscal 2005, the Company settled an outstanding environmental lawsuit relating to activities in 1985. There was approximately $226,800 in associated costs, which have been excluded from Adjusted Income from Operations. During the first quarter Fiscal 2005, the Company incurred approximately $78,200 in associated costs related to the potential settlement of a separate lawsuit. These combined expenses total $305,000 for the six months ended December 31, 2004. Both complaints related to property the Company owned in New Jersey from August 1984 to June 1985, through a graphic arts, camera-manufacturing subsidiary whose operations were terminated in 1986. Settlement of the remaining claim has been submitted to a Neutral party, and the Company is awaiting a potential settlement.

As of March 31, 2005, the Company recoded an income tax benefit of approximately $340,000 ($.04 and $.03 per basic and diluted share) resulting from a decrease in the Company's valuation allowance against its deferred tax asset. The deferred tax asset primarily relates to losses reported in prior years, and the Company believes it is likely they will utilize a portion of these prior year net operating loss carryforwards.

For the third quarter of Fiscal 2005, Net Income, which includes the deferred tax benefit, was $998,599 or $.11 per basic share and $.10 per diluted share, an increase of $574,100 or 135%, compared to Net Income of $424,507 or $.05 per basic share and $.04 per diluted share for the same period last year. For the nine months ended March 31, 2005, Adjusted Net Income, which includes the deferred tax benefit and which also excludes the above costs associated with the lawsuits, would have been $1,688,949 or $.18 per basic share and $.17 per diluted share, an increase of $750,900 or 80%, compared to Net Income of $938,011 or $.10 per basic and diluted share for the same period last year. Net Income for the nine months ended March 31, 2005 was $1,384,011 or $.15 per basic share and $.14 per diluted share.

At March 31, 2005, the Company had $673,300 in total debt, as compared to $1.67 million at June 30, 2004, the end of the Company's prior fiscal year. The Company continues to have positive cash flow and primarily use internally generated funds to reduce debt, and has repaid in full, one of two subordinated notes related to a prior dental acquisition. The Company's working capital was $3.46 million at March 31, 2005 compared to $2.58 million at June 30, 2004, an increase of 34%.

The Company exhibited at several major national and international trade and exhibition shows in the current quarter, including the European Congress of Radiology (Austria), the Chicago Midwinter Dental, the Hinman Dental (Georgia), the American Association of Endodontics (Texas), the International Dental Show (Germany), the Sao Paulo Dental Congress (Brazil), the Western Veterinary Congress (Nevada), and the American Animal Hospital Association (Maryland). All costs associated with these shows were recorded in the third quarter Fiscal 2005. The Company believes that each of these shows have created significant, worldwide interest in the Company's products, which is reflected in the growth of sales.

AFP Imaging Corporation's quality assurance program is ISO 9001 certified, an international standard. The Company designs, develops, manufactures, and distributes radiographic imaging equipment whose products are widely utilized in dental and medical diagnostics. The Company's new products and imaging technology is providing the gateway for future growth. AFP's products are used by medical, dental, veterinary and industrial professionals. The Company's products include x-ray units, digital x-ray sensors, film processors, chemistry, and panoramic units. The Company's products are sold worldwide under various brand names, which include AFP, DENT-X, and EVA(R). For additional product information please visit our web sites at www.afpimaging.com and www.dent-x.com.

Three Months Ended        Nine Months Ended
                            March 31,                 March 31
                        2005        2004        2005          2004
                     ----------- ----------- ------------ ------------

Net Sales            $6,240,931  $5,476,342  $16,978,637  $14,191,778
                     ----------- ----------- ------------ ------------

Adjusted Operating
 Income(1)             $663,369    $496,060   $1,451,967   $1,154,177

Environmental
 Lawsuits Charges(1)
                              -           -     $304,938            -

Operating Income       $663,369    $496,060   $1,147,029   $1,154,177

Income Before Taxes    $641,134    $459,569   $1,042,486   $1,034,545

Provision/(Benefit)
 for Taxes            ($357,465)    $35,062    ($341,525)     $96,534

Net Income             $998,599    $424,507   $1,384,011     $938,011

Environmental
 Lawsuits Charges(1)
                              -           -     $304,938            -

Adjusted Net Income(1) $998,599    $424,507   $1,688,949     $938,011

Net Income per share
    Basic                  $.11        $.05         $.18         $.10
    Fully Diluted          $.10        $.04         $.17         $.10

Weighted average
 shares outstanding
    Basic             9,399,717   9,271,054    9,373,386    9,271,054
    Fully Diluted     9,933,654   9,822,026    9,939,761    9,542,032
                     ----------- ----------- ------------ ------------

(1) Excluded from Adjusted Operating Income and Adjusted Net Income for the nine months ended March 31, 2005, are specific non-operating charges of $305,000, both accrued and/or incurred, associated with settling the outstanding environmental lawsuits.

The remarks contained in this press release and presented elsewhere by management from time to time contain forward-looking statements, which involve risks and uncertainties, including statements regarding the Company's plans, objectives, expectations and intentions. The Company's actual results may differ significantly from the results discussed in this press release or in other forward-looking statements presented by management. Among the factors that could cause actual results to differ materially include failure of revenue on new products to develop as estimated, regulatory delays, loss of existing customers, the Company's inability to meet increasing demand for its new products, general downward trends in the Company's industry and other risk factors as described in the Company's filings with the Securities and Exchange Commission. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any such statements to reflect any change in the Company's expectation or any change in events, conditions or circumstances on which such statement is based.