**SECURITIES
        AND EXCHANGE COMMISSION**
 **WASHINGTON,
        D.C. 20549**
  **FORM
        10-QSB**
  **QUARTERLY
        REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE**
 **SECURITIES
        EXCHANGE ACT OF 1934**
  **FOR
        THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2005**
  Commission
        File Number: #333-44188
  **ITEC
        ENVIRONMENTAL GROUP, INC.**
 (Exact
        name of small business issuer as specified in its charter)
  Delaware
 (State
        or
        other jurisdiction of incorporation or organization)
  31-1705310
 (IRS
        Employer Identification Number)
  5300
        Claus Road
 Riverbank,
        CA 95367
 (Address
        of principal executive offices)(Zip Code)
  (209)
        848-3900
 (Registrant's
        telephone no., including area code)
  Indicate
        by check mark whether the registrant (1) has filed all reports required to
        be
        filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
        the
        preceding 12 months (or for such shorter period that the registrant was required
        to file such reports), and (2) has been subject to such filing requirements
        for
        the past 90 days.
 Yes
        [X ]
        No [ ]
  Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2 of the Exchange Act)
 Yes
        [ ]
        No [X ]
  The
        number of shares of the Company's common stock outstanding on November 13,
        2005:
        48,153,937
   
  **ITEC
        ENVIRONMENTAL GROUP, INC.**
 **FORM
        10-QSB**
 TABLE
          OF
          CONTENTS
 PART
                    I
                
                FINANCIAL
                    INFORMATIONItem
                    1
                
                Financial
                    StatementsItem
                    2
                
                Management's
                    Discussion and Analysis or Plan of OperationItem
                    3
                
                Controls
                    and ProceduresPART
                    II
                
                OTHER
                    INFORMATIONItem
                    1
                
                Legal
                    ProceedingsItem
                    2
                
                Unregistered
                    Sales of Equity Securities and Use of ProceedsItem
                    3
                
                Defaults
                    Upon Senior SecuritiesItem
                    4
                
                Submission
                    of Matters to a Vote of Security HoldersItem
                    5
                
                Other
                    InformationItem
                    6
                
                ExhibitsSIGNATURES
  2
 
 **PART
              I - FINANCIAL INFORMATION**
  **Item
              1.****Financial
              Statements**
  **ITEC
              Environmental Group, Inc. and subsidiary**
 **A
              Development Stage Company**
 **Condensed
              Consolidated Balance Sheet**
 **(Unaudited)**
 September
                          30,2005Current
                        assetsCash
                        and cash equivalents
                    
                    $
                    144,269Restricted
                        cash held in escrow
                    
                    
                    1,289,192Inventory
                    
                    
                    46,800Prepaid
                        expenses and other current assets
                    
                    
                    57,824Total
                        current assets
                    
                    
                    1,538,085Property
                        and equipment, net
                    
                    
                    1,427,103Notes
                        receivable - officer
                    
                    
                    147,973Deferred
                        debt issue costs
                    
                    
                    231,666Deposits
                    
                    
                    34,034Total
                        assets
                    
                    $
                    3,378,861Current
                        liabilitiesAccounts
                        payable
                    
                    $
                    614,149Accounts
                        payable - related party
                    
                    
                    394,960Accrued
                        payroll and related
                    
                    
                    666,288Accrued
                        liabilities - officer
                    
                    
                    132,125Accrued
                        liabilities
                    
                    
                    372,508Current
                        portion of capital lease obligations
                    
                    
                    15,556Notes
                        payable, net of debt discount of $688,390
                    
                    
                    1,019,610Notes
                        payable - officer
                    
                    
                    14,600Total
                        current liabilities
                    
                    
                    3,229,796Non-current
                        liabilitiesNotes
                        payable - Italian investors
                    
                    
                    353,980Capital
                        lease obligations, net of current portion
                    
                    
                    13,795Deferred
                        revenues
                    
                    
                    125,000Notes
                        payable to California Integrated Waste Management Board,
                        net of discount
                        of $9,250
                    
                    
                    1,990,250Total
                        non-current liabilities
                    
                    
                    2,483,025Total
                        liabilities
                    
                    
                    5,712,821Commitments
                        and contingenciesStockholders'
                        DeficitPreferred
                        stock, $0.001 par value, 10,000,000 shares
                      authorized
                        , none issued and outstanding
                    
                    
                    -Common
                        stock, $0.001 par value, 750,000,000 shares
                      authorized,
                        39,232,977 shares issued and outstanding
                    
                    
                    39,235Common
                        stock issuable, 769,655 shares
                    
                    
                    770Additional
                        paid-in capital
                    
                    
                    16,048,892Deferred
                        stock-based consulting
                    
                    
                    (613,765
                    )Accumulated
                        deficit during the development stage
                    
                    
                    (17,809,092
                    )Total
                        stockholders' deficit
                    
                    
                    (2,333,960
                    )Total
                        liabilities and stockholders' deficit
                    
                    $
                    3,378,861
 See
            accompanying notes to condensed consolidated
            financial statements.
  3


**ITEC
          Environmental Group, Inc. and subsidiary**
 **A
          Development Stage Company**
 **Condensed
          Consolidated Statements of Operations**
 **(Unaudited)**
 Three
                    months ended
                  September
                    30,
                
                Nine
                    months ended
                  September
                    30,
                
                Inception
                  (March
                      28, 2000)
                    to-date
                      through
                    September
                      30,2005
                
                2004
                
                2005
                
                2004
                
                2005Revenue
                
                $
                -
                
                $
                -
                
                $
                -
                
                $
                1,750
                
                $
                494,387Cost
                    of goods sold
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                295,977Gross
                    profit
                
                
                -
                
                
                -
                
                
                
                
                
                1,750
                
                
                198,410Operating
                    expensesPlant
                    expenses
                
                
                19,842
                
                
                8,772
                
                
                24,993
                
                
                31,889
                
                
                202,976Payroll
                
                
                95,570
                
                
                30,621
                
                
                681,886
                
                
                255,703
                
                
                2,818,056Consulting
                    and legal fees
                
                
                2,742,316
                
                
                424,431
                
                
                5,007,208
                
                
                681,033
                
                
                10,007,280Research
                    and development
                
                
                -
                
                
                50,000
                
                
                -
                
                
                62,000
                
                
                177,490General
                    and administrative
                
                
                269,976
                
                
                34,241
                
                
                506,729
                
                
                188,450
                
                
                2,809,397Depreciation
                    and amortization
                
                
                9,782
                
                
                16,205
                
                
                34,346
                
                
                48,641
                
                
                190,461Total
                    operating expenses
                
                
                3,137,486
                
                
                564,270
                
                
                6,255,162
                
                
                1,267,716
                
                
                16,205,660Loss
                    from operations before interest
                
                
                (3,137,486
                )
                
                (564,270
                )
                
                (6,255,162
                )
                
                (1,265,966
                )
                
                (16,007,250
                )Other
                    expense (income)Interest
                    expense
                
                
                1,150,126
                
                
                40,108
                
                
                1,266,516
                
                
                242,348
                
                
                1,951,124Loss
                    on conversion of notes payable for stock
                
                
                359,724
                
                
                -
                
                
                515,864
                
                
                -
                
                
                515,864Gain
                    on extinguishment of debt
                
                
                (292,389
                )
                
                -
                
                
                (292,389
                )
                
                -
                
                
                (926,600
                )Other
                    expense (income)
                
                
                -
                
                
                (27,332
                )
                
                (27
                )
                
                (58,883
                )
                
                254,040Total
                    other expense
                
                
                1,217,461
                
                
                12,776
                
                
                1,489,964
                
                
                183,465
                
                
                1,794,428Net
                    loss before income taxes
                
                
                (4,354,947
                )
                
                (577,046
                )
                
                (7,745,126
                )
                
                (1,449,431
                )
                
                (17,801,678
                )Provision
                    for income taxes
                
                
                1,664
                
                
                -
                
                
                2,464
                
                
                -
                
                
                7,414Net
                    loss
                
                $
                (4,356,611
                )
                $
                (577,046
                )
                $
                (7,747,590
                )
                $
                (1,449,431
                )
                $
                (17,809,092
                )Basic
                    and diluted net loss per share
                
                $
                (0.12
                )
                $
                (0.48
                )
                $
                (0.33
                )
                $
                (1.61
                )
                $
                (4.58
                )Weighted
                      average shares used
                    in
                      computing net loss per share
                
                
                36,545,559
                
                
                1,210,109
                
                
                23,779,468
                
                
                898,508
                
                
                3,885,198
  See
        accompanying notes to condensed consolidated
        financial statements.
 4
  **ITEC
        Environmental Group, Inc. and subsidiary****A Development Stage
        Company****Condensed Consolidated Statements of Cash
        Flows(Unaudited)**
 Nine
                                  months ended September 30,
                              
                              Inception
                                (March
                                  28,2000)
                                to-date
                                      through
                                      September
                                        30,2005
                              
                              2004
                              
                              2005Cash
                                  flows from operating activities:Net
                                  loss
                              
                              $
                              (7,747,590
                              )
                              $
                              (1,449,431
                              )
                              $
                              (17,809,092
                              )Adjustments
                                  to reconcile net loss to net cashused
                                  by operating activities:Depreciation
                              
                              
                              29,346
                              
                              
                              41,141
                              
                              
                              140,462Amortization
                              
                              
                              5,250
                              
                              
                              7,500
                              
                              
                              50,250Gain
                                  on extinguishment of debt
                              
                              
                              (292,390
                              )
                              
                              -
                              
                              
                              (926,601
                              )Loss
                                  on conversion of debt for common stock
                              
                              
                              515,864
                              
                              
                              -
                              
                              
                              515,864Issuance
                                  of common stock for services
                              
                              
                              2,943,007
                              
                              
                              366,356
                              
                              
                              6,501,055Issuance
                                  of common stock for compensation
                              
                              
                              -
                              
                              
                              55,500
                              
                              
                              312,500Issuance
                                  of warrants for compensation
                              
                              
                              978,966
                              
                              
                              1,000
                              
                              
                              978,966Warrant
                                  issue costs
                              
                              
                              -
                              
                              
                              -
                              
                              
                              6,000Amortization
                                  of deferred fees
                              
                              
                              1,177,418
                              
                              
                              -
                              
                              
                              1,177,418Amortization
                                  of debt issue costs and discount
                              
                              
                              762,025
                              
                              
                              190,000
                              
                              
                              762,025Changes
                                  in operating assets and liabilities:Accounts
                                  receivable
                              
                              
                              -
                              
                              
                              (28,352
                              )
                              
                              -Inventory
                              
                              
                              (46,800
                              )
                              
                              -
                              
                              
                              (46,800
                              )Prepaid
                                  expenses and deposits
                              
                              
                              (20,648
                              )
                              
                              (107,748
                              )
                              
                              (74,607
                              )Accounts
                                  payable
                              
                              
                              364,754
                              
                              
                              218,153
                              
                              
                              1,294,608Accrued
                                  liabilities
                              
                              
                              405,985
                              
                              
                              228,854
                              
                              
                              1,392,163Deferred
                                  revenue
                              
                              
                              (75,001
                              )
                              
                              -
                              
                              
                              400,189Other
                              
                              
                              -
                              
                              
                              (4,800
                              )
                              
                              (17,248
                              )Net
                                  cash used by operating activities
                              
                              
                              (999,814
                              )
                              
                              (481,827
                              )
                              
                              (5,342,848
                              )Cash
                                  flows from investing activities:Purchase
                                  of property, plant & equipment
                              
                              
                              (1,262,849
                              )
                              
                              -
                              
                              
                              (1,518,537
                              )Purchase
                                  of license fees
                              
                              
                              -
                              
                              
                              -
                              
                              
                              (50,000
                              )Advances
                                  made on notes receivable from officer
                              
                              
                              -
                              
                              
                              -
                              
                              
                              (147,973
                              )Net
                                  cash used by investing activities
                              
                              
                              (1,262,849
                              )
                              
                              -
                              
                              
                              (1,716,510
                              )Cash
                                  flows from financing activities:Proceeds
                                  from CIWMB notes payable
                              
                              
                              
                              
                              
                              -Cash
                                  draws from restricted escrow funds
                              
                              
                              700,808
                              
                              
                              -
                              
                              
                              700,808Principal
                                  payments on capital lease obligations
                              
                              
                              (4,691
                              )
                              
                              (6,887
                              )
                              
                              (19,682
                              )Proceeds
                                  from sale of common stock
                              
                              
                              -
                              
                              
                              -
                              
                              
                              1,821,494Proceeds
                                  from issuance of notes payable
                              
                              
                              1,907,302
                              
                              
                              527,700
                              
                              
                              4,953,860Payments
                                  on notes payable
                              
                              
                              (90,353
                              )
                              
                              
                              
                              
                              (141,353
                              )Payments
                                  on notes payable - officers
                              
                              
                              (111,500
                              )
                              
                              -
                              
                              
                              (111,500
                              )Net
                                  cash provided by financing activities
                              
                              
                              2,401,566
                              
                              
                              520,813
                              
                              
                              7,203,627Net
                                  increase in cash and cash equivalents
                              
                              
                              138,903
                              
                              
                              38,986
                              
                              
                              144,269Cash
                                  and cash equivalents, beginning of period
                              
                              
                              5,366
                              
                              
                              125
                              
                              
                              -Cash
                                  and cash equivalents, end of period
                              
                              $
                              144,269
                              
                              $
                              39,111
                              
                              $
                              144,269**Supplemental
                                  disclosures of cash flow information:**Cash
                                  paid for interest
                              
                              $
                              35,111
                              
                              $
                              -
                              
                              $
                              35,111Cash
                                  paid for income taxes
                              
                              $
                              2,464
                              
                              $
                              1,600
                              
                              $
                              4,064Non-cash
                                  investing and financing activitiesCommon
                                  stock issued for services
                              
                              $
                              -
                              
                              $
                              366,356
                              
                              $
                              757,345Common
                                  stock issued for compensation
                              
                              $
                              -
                              
                              $
                              55,500
                              
                              $
                              240,500Common
                                  stock issued for debt conversion
                              
                              $
                              143,402
                              
                              $
                              114,745
                              
                              $
                              3,234,810Common
                                  stock issued for future legal fees
                              
                              $
                              -
                              
                              $
                              -
                              
                              $
                              1,177,418Warrants
                                  issuance
                              
                              $
                              -
                              
                              $
                              1,000
                              
                              $
                              -Restricted
                                  cash loan proceeds
                              
                              $
                              1,990,000
                              
                              $
                              -
                              
                              $
                              1,990,000Debt
                                  discounts
                              
                              $
                              1,484,881
                              
                              $
                              -
                              
                              $
                              1,484,881Deferred
                                  stock based consulting
                              
                              $
                              613,765
                              
                              $
                              -
                              
                              $
                              613,765Debt
                                  issue costs
                              
                              $
                              197,200
                              
                              $
                              -
                              
                              $
                              197,200
  See
        accompanying notes to condensed consolidated financial statements.
  5
  **ITEC
        Environmental Group, Inc. and Subsidiary**
 **A
        Development-Stage Company**
 **Notes
        to Condensed Consolidated Financial Statements**
 **September
        30, 2005**
 **(Unaudited)**
  Note
        1. Description of Business and Significant Accounting
        Policies
  This
        summary of significant accounting policies of Itec Environmental Group, Inc.
        (f/k/a Beechport Capital Corp.), is presented to assist in understanding
        the
        Company’s condensed consolidated financial statements. The financial statements
        and notes are representations of the Company’s management and Board of
        Directors, who are responsible for their integrity and objectivity.
  Organization
        and Business - Beechport Capital Corp. (“Beechport”) was organized as a
        Colorado corporation in January 1989, in order to evaluate, structure and
        complete a merger with or acquisition of prospects consisting of private
        companies, partnerships or sole proprietorships. At a special September 2002
        meeting of the shareholders of Beechport , the Company authorized a merger
        of
        Beechport into its wholly-owned subsidiary, Itec Environmental Group,
        Inc.
  Itec
        Environmental Group, Inc. (“Itec” or the “Company”) was incorporated under the
        laws of the State of Delaware in March 2000. Itec was formed for the purpose
        of
        acquiring certain patented technology and the development of a worldwide
        market
        for its usage. The Company's subsidiary, ECO2 Environmental Systems, Inc.
        (“ECO2”), was incorporated under the laws of the State of Delaware in April
        2000, and only activity to date has been registration of a trademark for
        ECO2.
        Unless the context indicates otherwise, all references herein to the Company
        include Itec, its predecessor, Beechport, and its wholly-owned subsidiary,
        ECO2.
        All intercompany transactions have been eliminated in these condensed
        consolidated financial statements.
  6
  The
        Company is a development stage entity and is primarily engaged in activities
        to
        become a worldwide supplier of oil and agricultural chemical container recycling
        equipment and related systems. The Company's business objective is to build
        on
        the foundation of the licensed patented technology, to develop proprietary
        recycling equipment, and to form strategic alliances to become a supplier
        of
        recycling equipment and operate plastic waste recycling plants. Itec's primary
        revenue source, the ECO2TM Environmental System, is a new cost-effective,
        environmentally sensitive technology for cleaning plastic contaminated by
        substances that make most types of plastic ineligible for traditional recycling
        programs. The Company's initial marketing of its technology was concentrated
        in
        Italy. The Company is currently marketing its technology in the United States
        and other countries. The initial focus of the Company’s research and development
        efforts is the generation of products for recycling of plastic waste. The
        Company has limited experience in manufacturing of recycling systems and
        operating plastic waste recycling plants. There can be no assurance that
        the
        Company will not encounter problems in marketing and selling its proprietary
        recycling systems.
  The
        Company’s success will depend in part on its ability to obtain patents and
        maintain product license rights, maintain trade secrets and operate without
        infringing on the proprietary rights of others, both in the United States
        and
        other countries. There can be no assurance that patents licensed by the Company
        will not be challenged, invalidated, or circumvented, or that the rights
        granted
        thereunder will provide proprietary protection or competitive advantages
        to the
        Company. The Company has the right to exploit recycling technology, which
        the
        Company has licensed to use from Honeywell Corporation.
  The
        Company has commenced construction of its first recycling line at its Riverbank
        plant. Equipment necessary to achieve plant production of 3,000 pounds per
        hour
        has been ordered and payments to equipment suppliers began in August. The
        production line is approximately 60% complete and Company management expects
        to
        start testing the solvent washing and CO2 portions of the system soon with
        production starting in January 2006.
  In
        June
        2005, pursuant to terms of a 4.25% promissory note the Company received into
        an
        escrow account $1,990,000, after deduction of $10,000 for loan fees to the
        lender, from the California Integrated Waste Management Board (the “CIWMB”). The
        CIWMB makes low interest loans to local government agencies and private business
        entities within a Recycling Market Development Zone to increase diversion
        of
        nonhazardous solid waste from landfills and to promote market demand for
        secondary and post consumer materials. Approval for the loan was based on
        the
        Company’s projection to build its first Eco2 Environmental System Plant and to
        divert post consumer plastic bottles as a result of the loan. Borrowing of
        CIWMB
        funds requires, among other things, verification of matching funds, which
        will
        co-fund equipment purchases. As described in Note 4, in August 2005 the Company
        received a $600,000 investment and deposited funds sufficient to enable the
        Company to begin construction on and ordering equipment for its first Eco2
        Environmental System Plant recycling plant.
  As
        of
        September 30, 2005, the Company had purchased equipment and made deposits
        and
        other expenditures for its recycling plant of approximately $1,315,000, of
        which
        approximately $950,000 has been funded by CIWMB borrowing and $365,000 from
        new
        investment funds.
  Business
        risks and uncertainties - The Company operates in the evolving field of
        materials recycling processing. New developments could both significantly
        and
        adversely affect existing and emerging technologies in the field. The
        Company’s success in developing additional marketable products and processes and
        achieving a competitive position will depend on its ability to retain qualified
        management personnel and to raise sufficient capital to meet its operating
        and
        development needs. While the Company is seeking financing through equity
        and
        loans, there can be no assurance that the Company will be successful in
        accomplishing its objectives.
  Basis
        of presentation and Going Concern- The accompanying condensed consolidated
        financial statements have been prepared in conformity with generally accepted
        accounting principles, which contemplate continuation of the Company as a
        going
        concern. The Company has incurred recurring losses from operations, cash
        used in
        operations and has a net working capital deficiency that raises substantial
        doubt about its ability to continue as a going concern. The Company incurred
        a
        net loss of $7,747,590 and cash used in operations of $999,816 during the
        nine
        months ended September 30, 2005, and, as of that date, had a working capital
        deficiency of $1,691,711 and total stockholders’ deficiency of $2,333,960 which
        includes accumulated losses from March 28, 2000 (inception) to September
        30,
        2005 of $17,809,092.
  7
  Company
        management intends to raise additional debt and/or equity financing to fund
        future operations and to provide additional working capital. However, there
        is
        no assurance that such financing will be obtained in sufficient amounts
        necessary to meet the Company’s needs. In view of these matters, continuation as
        a going concern is dependent upon the Company's ability to meet its financing
        requirements, raise additional capital, and the success of its future operations
        or completion of a successful business combination
  The
        accompanying condensed consolidated financial statements do not include any
        adjustments to reflect the possible future effects on the recoverability
        and
        classification of assets or the amounts and classifications of liabilities
        that
        may result from the possible inability of the Company to continue as a going
        concern.
  Interim
        financial statements- The accompanying unaudited interim condensed
        consolidated financial statements represent the financial activity of Itec
        and
        its subsidiary. The condensed consolidated financial statements for the interim
        periods ended September 30, 2005 and September 30, 2004, have been prepared
        in
        accordance with generally accepted accounting principles for interim financial
        information in the United States of America and in accordance with the
        instructions to Form 10-QSB and Rule 10-01 of Regulation S-X of the U.S.
        Securities and Exchange Commission. Accordingly, the condensed consolidated
        financial statements do not include all of the information and notes to
        financial statements required by generally accepted accounting principles
        for
        complete financial statements. In the opinion of management, all adjustments
        (consisting of normal recurring adjustments) considered necessary for a fair
        presentation have been included. Results of operations for interim periods
        are
        not necessarily indicative of results to be expected for the full fiscal
        year or
        for any future period. These interim condensed consolidated financial statements
        should be read in conjunction with the Company’s audited annual financial
        statements and related notes thereto, which are included in the Company’s
        December 31, 2004 Annual Report on Form 10-KSB.
  Use
        of
        estimates in the preparation of financial statementsThe preparation of
        financial statements in conformity with generally accepted accounting principles
        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
        revenue and expenses during the reporting period. Actual results could differ
        from those estimates. The more significant accounting estimates inherent
        in the
        preparation of the Company's financial statements include estimates as to
        the
        valuation of equity related instruments issued, and valuation allowance for
        deferred income tax assets.
  Cash
        equivalents - The Company considers deposits that can be redeemed on demand
        and investments that have original maturities of less than three months when
        purchased to be cash equivalents.
  Restricted
        Cash in Escrow - In June 2005, the Company received cash from the California
        Integrated Waste Management Board pursuant to a $2,000,000 note payable,
        and in
        August 2005 received cash from an investor Fund pursuant to $600,000 notes
        payable. Funds received from these borrowings have been placed in escrow,
        with
        draws made by the Company upon satisfaction of certain conditions, including
        among others, presentation of invoices for purchases of authorized equipment
        to
        be financed. These funds have been classified as Restricted Cash in Escrow
        as
        they are not otherwise available for use by the Company.
  Inventory
        - Inventory is comprised of raw materials and supplies to be utilized in
        the
        recycling process and is recorded at cost determined on a first-in first-out
        basis.
  Assets
        held under capital leases - Assets held under capital leases are recorded at
        the lower of the net present value of the minimum lease payments or the fair
        value of the leased asset at the inception of the lease. Amortization expense
        is
        computed using the straight-line method over the shorter of the estimated
        useful
        lives of the assets or the period of the related lease.
  Deferred
        revenue - Amounts billed or received in advance of when services are
        provided or products delivered are recorded as Deferred Revenue in the
        accompanying consolidated balance sheet.
  8
  Contingencies- Certain conditions may exist as of the date financial statements are
        issued, which may result in a loss to the Company, but which will only be
        resolved when one or more future events occur or fail to occur. The Company’s
        management and its legal counsel assess such contingent liabilities, and
        such
        assessment inherently involves an exercise of judgment. In assessing loss
        contingencies related to legal proceedings that are pending against the Company
        or unasserted claims that may result in such proceedings, the Company’s legal
        counsel evaluates the perceived merits of any legal proceedings or unasserted
        claims as well as the perceived merits of the amount of relief sought or
        expected to be sought therein. If the assessment of a contingency indicates
        that
        it is probable that a material loss has been incurred and the amount of the
        liability can be estimated, then the estimated liability would be accrued
        in the
        Company’s financial statements. If the assessment indicates that a potentially
        material loss contingency is not probable but is reasonably possible, or
        is
        probable but cannot be estimated, then the nature of the contingent liability,
        together with an estimate of the range of possible loss if determinable and
        material, would be disclosed. Loss contingencies considered remote are generally
        not disclosed unless they involve guarantees, in which case the nature of
        the
        guarantee would be disclosed.
  Fair
        value of financial instruments - The Company measures its financial assets
        and liabilities in accordance with generally accepted accounting principles.
        For
        certain of the Company's financial instruments, including cash and cash
        equivalents, accounts payable and accrued liabilities, the carrying amounts
        approximate fair value due to their short maturities. The amounts recorded
        for
        notes payable also approximate fair value because current interest rates
        offered
        to the Company for debt of similar maturities are substantially the
        same.
  Revenue
        and expense recognition - The Company recognizes revenue when there is
        persuasive evidence of an arrangement, the product has been delivered or
        the
        services have been provided to the customer, the sales price is fixed or
        determinable, and collectibility is reasonably assured.
  The
        Company recognizes revenues from sales of equipment and products upon delivery
        to customers. When products are configured to customer requirements, revenue
        is
        recorded upon the successful completion of any final test procedures.
  Income
        taxes - The Company utilizes SFAS No. 109, “Accounting for Income Taxes,”
        which requires recognition of deferred tax assets and liabilities for the
        expected future tax consequences of events that have been included in the
        financial statements or tax returns. Under this method, deferred income taxes
        are recognized for the tax consequences in future years of differences between
        the tax bases of assets and liabilities and their financial reporting amounts
        at
        each period end based on enacted tax laws and statutory tax rates applicable
        to
        the periods in which the differences are expected to affect taxable income.
        Valuation allowances are established, when necessary, to reduce deferred
        tax
        assets to amounts expected to be realized. The provision for income taxes
        represents the tax payable for the period and change during the period in
        deferred tax assets and liabilities.
  Stock-based
        compensation - Effective January 1, 2005, the Company accounts for all
        options and warrant grants to employees and consultants in accordance with
        SFAS
        123R, which requires recording an expense over the requisite service period
        for
        the fair value of all options or warrants granted employees and consultants.
        The
        Company did not issue any options or warrants in 2004.
  Basic
        and diluted net earnings per share - Basic net earnings (loss) per common
        share is computed by dividing net earnings (loss) applicable to common
        shareholders by the weighted-average number of common shares outstanding
        during
        the period. Diluted net earnings (loss) per common share is determined using
        the
        weighted-average number of common shares outstanding during the period, adjusted
        for the dilutive effect of common stock equivalents, consisting of shares
        that
        might be issued upon exercise of common stock options, warrants or convertible
        promissory notes. In periods where losses are reported, the weighted-average
        number of common shares outstanding excludes common stock equivalents, because
        their inclusion would be anti-dilutive. Potentially dilutive securities include
        stock options and warrants, and convertible debt securities. Computations
        of net
        loss per share for the periods ended September 30, 2004, exclude 12,121 shares
        relating to common shares issuable upon exercise of outstanding warrants.
        Computations of net loss per share for the periods ended September 30, 2005,
        exclude 20,717,930 shares relating to common shares issuable upon exercise
        of
        outstanding warrants, and 18,914,945 shares relating to common shares issuable
        upon conversion of convertible notes payable. These common stock equivalents
        could have the effect of decreasing diluted income per share in future
        periods.
  9
  Concentrations
        - Financial instruments that potentially subject the Company to concentrations
        of credit risk consist principally of cash equivalents, restricted cash held
        in
        escrow and trade accounts receivables. At times, amounts of cash or cash
        equivalents in U.S. financial institutions exceed amounts insured by agencies
        of
        the U.S. Government.
  Development-stage
        company - The Company presents its condensed consolidated financial
        statements in accordance with SFAS No. 7 “Accounting and Reporting by
        Development Stage Enterprises”. This statement specifies the guidelines for
        identifying an enterprise in the development stage and the standards of
        financial accounting and reporting for such an enterprise, which includes
        among
        other things, presentation of inception to date consolidated statements of
        operations and of cash flows.
  Reclassifications
        - Certain amounts in 2004 financial statements have been reclassified to
        conform
        with 2005 presentation.
  Recent
        accounting pronouncements - In December 2004, the Financial Accounting
        Standards Board (“FASB”) released a revision to Statement of Financial
        Accounting Standard (“SFAS”) No. 123, Accounting for Stock-Based Compensation
        (“FAS 123R”). FAS 123R addresses the accounting for share-based payment
        transactions in which an enterprise receives employee services in exchange
        for
        (a) equity instruments of the enterprise or (b) liabilities that are based
        on
        the fair value of the enterprise's equity instruments or that may be settled
        by
        the issuance of such equity instruments. The statement eliminates the ability
        to
        account for share-based compensation transactions using APB Opinion No. 25,
        Accounting for Stock Issued to Employees, and generally requires instead
        that
        such transactions be accounted for using a fair-value-based method. The Company
        adopted FAS 123R effective with the year beginning January 1, 2005. With
        the
        adoption of this new statement, the Company will recognize substantially
        more
        compensation expense than would have been recorded under APB 25.
  In
        December 2004, the Financial Accounting Standards Board issued SFAS No. 151,
        “Inventory Costs, an amendment of ARB No. 43, Chapter 4”, which clarifies the
        accounting for abnormal amounts of idle facility expense, freight, handling
        costs, and charges regardless of whether they meet the criterion of “so
        abnormal” that was originally stated in Accounting Research Bulletin No. 43,
        chapter 4. In addition, SFAS No. 151 requires that the allocation of fixed
        production overheads to conversion costs be based on the normal capacity
        of the
        production facilities. SFAS No. 151 is effective for inventory costs incurred
        during fiscal years beginning after June 15, 2005. Management does not expect
        the implementation of this new standard to have a material impact on its
        financial position, results of operations or cash flows.
  In
        December 2004, the Financial Accounting Standards Board Statement issued
        SFAS
        No. 153, “Exchanges of Nonmonetary Assets - an amendment of APB Opinion No. 29”,
        which amends Opinion 29 by eliminating the exception for nonmonetary exchanges
        of similar productive assets and replaces it with a general exception for
        exchanges of nonmonetary assets that do not have commercial substance. A
        nonmonetary exchange has commercial substance if the future cash flows of
        the
        entity are expected to change significantly as a result of the exchange.
        SFAS
        No. 153 is effective for a fiscal year beginning after June 15, 2005, and
        implementation is done prospectively. Management does not expect the
        implementation of this new standard to have a material impact on its financial
        position, results of operations and cash flows.
  In
        May
        2005, the FASB issued Statement of Financial Accounting Standards No. 154,
        “Accounting Changes and Error Corrections”, (SFAS 154”). SFAS 154 replaces APB
        Opinion No. 20, “Accounting Changes,” and SFAS No. 3, “Reporting Accounting
        Changes in Interim Financial Statements,” and changes the requirements for the
        accounting for and reporting of a change in accounting principle. The Company
        is
        required to adopt SFAS 154 in 2007. The Company’s results of operations and
        financial condition will only be impacted by SFAS 154 if the Company implements
        changes in accounting principles that are addressed by the standard or correct
        accounting errors in future periods.
  **Note
        2. Technology License**
  Effective
        June 30, 2000, the Company entered into a five-year patent license agreement
        with Honeywell International, Inc. (Honeywell), whereby the Company obtained
        a
        non-exclusive, nontransferable worldwide license to practice the methods
        and to
        make, use, and sell, the products which are covered by the proprietary rights,
        limited to the field of use of separating and recovering motor oil from high
        density polyethylene plastic. Under the terms of the agreement, the Company
        agreed to pay a $50,000 non-refundable initial license fee and an additional
        minimum annual royalties commencing upon delivery of the first equipment
        to an
        Itec customer, of the greater of $50,000 or 5% of the gross sales of all
        products and or services sold in the United States and 3% of the products
        and or
        services sold in countries other than the United States. The initial license
        fee
        of $50,000 is not creditable toward the minimum annual royalty and was payable
        in three equal installments. This license agreement automatically renews
        for
        additional one-year period after the end of the initial five-year
  10
  term
        unless written notice is given by either party of its intent to terminate
        the
        agreement. Honeywell may terminate this agreement in the event of a bankruptcy
        filing or insolvency of the Company, an assignment for the benefit of creditors
        of the Company, the nationalization of the industry which encompasses any
        products or services, any suspension of payments under the terms of the
        agreement by government regulation, the Company's failure to commence
        manufacture, a substantial change in ownership of the Company (whether resulting
        from merger, acquisition, consolidation or otherwise), another company or
        person
        acquiring control of the Company, or the existence of a state of war between
        the
        United States and any country where the Company has a license to manufacture
        products or provide services. In addition, if either party to the agreement
        defaults for any reason in any of the obligations under the terms of the
        agreement, the other party will have the right to terminate the agreement
        by
        giving at least 60 days’ written notice. Among other things, pursuant to terms
        of the agreement here are no rights to sub-license granted and require the
        Company to observe all applicable United States and foreign laws, regulations,
        rules, and decrees with respect to the transfer of the proprietary rights
        and
        related technical data to foreign countries and failure to conform to such
        laws,
        regulations, rules and decrees may result in criminal liability. In July
        2005,
        the Company and Honeywell amended certain terms of the license agreement,
        which,
        among other things, extended the agreement for an additional five years,
        with
        provisions for automatic one year renewals. Under this amended Agreement,
        the
        Company must pay minimum royalty amount of $50,000 for Year 1; $100,000 for
        Year
        2; $200,000 for Year 3 and $300,000 for Year 4 and thereafter.
  The
        $50,000 license fee was recorded as an intangible asset and amortized over
        the
        initial five year term on a straight-line basis. Accumulated amortization
        at
        September 30, 2005 was $50,000, and the net book value was $0.
  **Note
        3.  Notes Payable**
  Pursuant
        to terms of Business Loan Agreement, Security Agreements, and $2,000,000
        Promissory Note with the California Integrated Waste Management Board (“CIWMB”),
        in June 2005, the Company received into an escrow account $1,990,000, after
        deduction of $10,000 for loan fees paid to CIWMB. The loan fee is recorded
        as a
        debt discount to be amortized over the 10-year loan term. A portion
        of loan
        funds in the amount of $80,000 is reserved for interest payments on the note.
        Approval for the loan was based on the Company’s projection to build its first
        Eco2 Environmental System Plant and to divert 15,000 tons of post consumer
        plastic bottles annually as a result of the loan. The promissory note bears
        interest at 4.25% per annum, with interest only monthly payments during the
        first year, commencing in June, and then principal and interest monthly payments
        of $22,548 starting July 1, 2006 until fully paid in May 2015. The promissory
        note is collateralized by equipment to be purchased for the recycling plant,
        a
        secondary security interest in all other machinery and equipment and other
        Company assets, and is guaranteed by the Company’s Chief Executive Officer. The
        Company is permitted to make draws from cash in escrow upon meeting certain
        conditions, including presentation of equipment invoices, with 75% of each
        invoice to be paid from the CIWMB loan funds, with the remaining 25% being
        paid
        from the Company’s working capital.
  In
        January 2005, the Company issued for cash a 10% note payable for $50,000
        due in
        July 2005. The proceeds were used for working capital. In June 2005, the
        Company
        issued 2,576,750 shares of its common stock upon conversion of the note payable.
        The Company recorded the excess of estimated fair value of the shares issued
        (based on the $0.115 per share quoted market price on the conversion date)
        of
        $156,140 as an increase in additional paid-in capital and as a loss on
        conversion of notes payable for common stock.
  In
        April
        2005, the Company issued for cash a 10% note payable for $60,000 due in June
        2005, and convertible into shares of Company common stock at a per share
        price
        of approximately $0.02. The beneficial conversion feature on the conversion
        price being less than the $0.115 market price was recorded at $60,000, the
        maximum to be recorded, as an increase in additional paid-in capital and
        as a
        debt discount to be amortized to interest expense over the term of the note.
        In
        June 2005, the note was converted into 3,029,100 shares of Company common
        stock
        in accordance with conversion terms. The full amount of the $60,000 debt
        discount has been amortized to interest expense as of September 30,
        2005.
  In
        June
        2005, the Company borrowed $33,400 on a short-term borrowing arrangement.
        The
        proceeds were used for working capital. In August 2005, the Company issued
        1,708,472 shares of its common stock upon conversion of the note payable.
        The
        Company recorded the excess of estimated fair value of the shares issued
        (based
        on the $.23 per share quoted market price on the conversion date) of $359,724
        as
        an increase in additional paid-in capital and as a loss on conversion of
        notes
        payable for common stock.
  11
  In
        June
        2005, the Company issued for cash a 10% note payable for $128,000 due in
        October
        2005, and convertible into shares of Company common stock at the lesser of
        50%
        of the quoted trade price on the conversion date or $0.045 per share. The
        beneficial conversion feature on the conversion price being less than the
        $0.087
        market price was recorded at $128,000, the maximum to be recorded, as an
        increase in additional paid-in capital and as a debt discount to be amortized
        to
        interest expense over the term of the note. Through September 30, 2005, $121,653
        of the debt discount has been amortized to interest expense.
  In
        July
        2005, the Company issued for cash a 10% note payable for $250,000 due in
        October
        2005, and convertible into shares of Company common stock at the lesser of
        50%
        of the quoted trade price on the conversion date or $0.028 per share. The
        beneficial conversion feature on the conversion price being less than the
        $0.07
        market price was recorded at $250,000, the maximum to be recorded, as an
        increase in additional paid-in capital and as a debt discount to be amortized
        to
        interest expense over the term of the note. Through September 30, 2005, $191,667
        of the debt discount has been amortized to interest expense.
  In
        July
        2005, the Company issued for cash a 10% note payable for $30,000 due in October
        2005, and convertible into shares of Company common stock at the lesser of
        50%
        of the quoted trade price on the conversion date of $0.035 per share. In
        addition, the Company issued to the lender warrants to purchase 300,000 shares
        of its common stock at a per share price of $0.25 per share. The beneficial
        conversion feature (BCF) on the conversion price and on the warrants exercise
        price being less than the $0.09 market price was recorded at $30,000 ($11,818
        and $18,182 allocated to the warrants and BCF, respectively, the maximum
        to be
        recorded, as an increase in additional paid-in capital and as a debt discount
        to
        be amortized to interest expense over the term of the note. Through September
        30, 2005, $20,250 of the debt discount has been amortized to interest expense.
  In
        August
        2005, the Company received from The Elevation Fund, LLC (“The Elevation Fund”)
        cash of $600,000 in consideration for (i) a $600,000 promissory note, bearing
        interest at the greater of prime plus 5% or 10.75% (18% if there is an event
        of
        default) and due in 90 days or earlier in certain circumstances (the “Bridge
        Notes”), and (ii) cashless exercise warrants to purchase 8,500,000 shares of the
        Company’s common stock at an exercise price of $0.001 per share, immediately
        exercisable for ten years (the “Bridge Warrants”). The warrant value was
        recorded at $351,724, the proportionate portion of the value of the warrant
        using a Black-Scholes option pricing method to the total of the warrant value
        and face amount of the note, as an increase in additional paid-in capital
        and as
        a debt discount to be amortized to interest expense over the term of the
        note.
        Through September 30, 2005, $234,483 of the debt discount has been amortized
        to
        interest expense. The $20,000 origination fee paid directly to the lender
        was
        also deferred as a debt discount and is being amortized to interest expense.
        The
        bridge notes are collateralized by a second position lien in all Company
        equipment and a blanket lien on all other assets.
  Additionally
        in August 2005, the Company received from another investor cash of $100,000
        inconsideration for (i) a $100,000 Bridge Note, and (ii) Bridge Warrants
        for
        1,418,439 shares of Company common stock. The warrant value was recorded
        at
        $65,156 as an increase in additional paid-in capital and as a debt discount
        to
        be amortized to interest expense over the term of the note. Through September
        30, 2005, $43,437 of the debt discount has been amortized to interest expense.
  Bridge
        Notes are convertible in whole or in part into securities offered by the
        Company
        in its $7.5 million private placement offering of Senior Cumulative Debentures
        and Warrants (the “Private Placement”) on the same terms as such securities are
        sold to the other investors in the Private Placement, and in this regard
        the
        Company has granted the lender the right to invest up to the Bridge Notes
        amount
        on the same terms as are offered to other investors in the Private Placement.
        The Company has agreed to prepare and, as soon as practicable, but in no
        event
        later than 75 days following the closing date of the Private Placement (the
        “Filing Deadline”), file with the Securities and Exchange Commission (the “SEC”)
        a registration statement on Form SB-2 covering the resale of all shares of
        common stock underlying the Bridge Warrants, and has further agreed to use
        its
        reasonable best efforts to have such registration statement declared effective
        by the SEC as soon as practicable, but in no event later than the date which
        is
        180 days following the closing date of the Private Placement (the “Effectiveness
        Deadline”). In the event the registration statement required to be filed is not
        filed by the Filing Deadline, the Company shall issue to the lender additional
        cashless
  12
  warrants
        to purchase shares of the Company’s common stock (“Additional Warrants”) in an
        amount equal to 10% of the number of shares underlying the Bridge Warrant
        issued
        to the lender for each 30 day period (or a portion thereof) during which
        time
        such registration statement has not been filed with the SEC, which Additional
        Warrants shall be issued on the first day of each 30 day period commencing
        on
        the Filing Deadline. In addition, in the event the registration statement
        required to be filed is not declared effective by the SEC by the Effectiveness
        Deadline, the Company shall issue to the Lender Additional Warrants in an
        amount
        equal to 10% of the number of shares underlying the Warrant issued to the
        Lender
        for each 30 day period (or portion thereof) during which time such registration
        statement has not been declared effective by the SEC, which Additional Warrants
        shall be issued on the first day of each 30 day period and commencing on
        the
        Effectiveness Deadline. The exercise price for the Additional Warrants issued
        shall be the same as the exercise price of the warrants that are issued in
        the
        Private Placement. Additionally, pursuant to terms of the loan agreement
        relating to the Bridge Notes and Bridge Warrants for a period of three years
        following the date of borrowing, the Company shall provide to lender with
        a
        first right to purchase up to 50% of any equity or equity linked securities
        to
        be issued by the Company, except for certain Excluded Securities, as defined,
        on
        the same terms as such securities are offered to all other parties during
        such
        three year period. Due to the contingent nature of the conversion rights
        and the
        fact that the conversion price would equal the fair value of the Private
        Placement units there is no beneficial conversion value for the bridge
        notes.
  In
        August
        and September 2005, the Company received from other investors (the “Lenders”)
        cash of $600,000 in consideration for promissory notes totaling $600,000,
        bearing interest at 10% (18% if there is an event of default), due in 120
        days
        or earlier in certain circumstances (the “Lenders Notes”), and convertible into
        shares of the Company’s common stock at a per share price of the lesser of 75%
        of (i) $.13, or (ii) the price of the common stock of the Company on the
        Over
        The Counter Bulletin Board on the day the Lenders elect to convert. The
        beneficial conversion feature on the conversion exercise price being less
        than
        the $0.15 to $0.23 market price, at the date of the notes, was recorded at
        $600,000, the maximum to be recorded, as an increase in additional paid-in
        capital and as a debt discount to be amortized to interest expense over the
        term
        of the note. Through September 30, 2005, approximately $125,000 of the debt
        discount has been amortized to interest expense.
  **Note
        4. Common Stock, Stock Options and Warrants**
  Authorized
        Shares - The Articles of Incorporation of Itec authorize a maximum of
        750,000,000 shares of $0.001 par value common stock and 10,000,000 shares
        of
        $0.001 par value preferred stock. Each share of common stock is entitled
        to one
        voting right, the right to share in earnings and the right to share in assets
        upon liquidation.
  Reverse
        Stock Split - In December 2004, the Board of Directors authorized a 1-for-165
        reverse stock split to be effective December 20, 2004 to shareholders of
        record,
        and approved to keep the par value of the Common Stock at $0.001 per share.
        As a
        result of reverse stock split, the “Common stock” account was reduced, and the
“Additional paid-in capital” account was increased by the same amount. All share
        data presented is adjusted for the reverse stock split.
  Common
        Stock Issued for Services **-**The Company has an agreement with a
        related party for legal services whereby the related party is periodically
        issued vested non-forfeitable common shares of the Company and any proceeds
        from
        the sale of such shares by the related party are credited against invoice
        amounts due to that related party for legal services. The agreement has no
        stated term. Due to the contingent nature of the proceeds and the unstated
        term
        of the legal service agreement, the fair value of shares granted are expensed
        on
        the grant date. The related party invoices are accrued to accounts payable,
        periodically paid in cash and the accounts payable and legal expenses are
        credited for any proceeds in the period the proceeds are received by the
        related
        party and reported to the Company. During the nine months ended September
        30,
        2005, the legal services provider was granted 9,957,692 shares and the Company
        recorded legal expenses of $1,635,269. In addition, prior deferred fees of
        $1,177,418 from fiscal 2004 were considered utilized and therefore expensed
        in
        2005.
  During
        three months ended March 31, 2005, the company issued 3,956,545 shares, valued
        at $493,460 based on quoted trade prices at the grant dates, to other
        consultants for services. The Company also cancelled 8,024 shares previously
        recorded for consultants in the prior year.
  In
        February 2004, Itec executed an agreement with Cornell Capital Partners,
        LP
        (“Cornell”) whereby the Company issued a 24% note payable for $500,000. The
        Company put in an escrow with a law firm 303,030 shares of the Company’s common
        stock (“escrowed shares”) and twenty (20) advance notices of not less than
        $25,000 each. The law firm released these advance notices to the holder every
        seven (7) calendar days commencing April 5, 2004, all of which were released.
        At
        the option of the note holder, interest is payable either by Company common
        stock or cash. During the three months ended March 31, 2005, the Company
        issued
        an additional 3,000,000 shares of common stock to Cornell for services. In
        July
        2005, the Company entered into a settlement and release agreement with Cornell
        pursuant to which, among other things, the Company paid Cornell $90,353 and
        received 1,342,692 shares of it’s common stock back from escrow, which were the
        remaining amount of the 3,000,000 shares issued to Cornell in 2005, all amounts
        due and payable between the companies were considered fully-settled, and
        the
        note payable and agreement were cancelled and terminated. In connection with
        this settlement, the Company recorded a gain on forgiveness of debt of
        approximately $292,000 during the three months ending September 30, 2005,
        which
        includes a decrease in additional paid-in capital of approximately $121,000,
        the
        fair value of shares cancelled.
  13
  Pursuant
        to the “safe harbor” private offering exemption provided by Rule 506 of
        Regulation D under Section 4(2) and of the Securities Act of 1933, the Company
        issued 2,737,220 shares of its common stock (and certain registration rights)
        to
        an investment banker as retainer for certain corporate finance and investment
        banking services being provided pursuant to the corporate finance representation
        agreement between the parties entered into in May 2005. The agreement is
        for a
        period of one year, which shall be extended to two years upon completion
        of a
        successful financing. In the event of a consummated transaction, the Company
        will pay the investment banker fees ranging from 2% to 8% of amounts raised
        and
        issued to the investment banker varying amounts of securities issued in the
        financing, depending of the type of securities and nature of transaction.
        The
        shares were valued at $246,350 based on a $.09 quoted trade price on the
        grant
        date. The $246,350 is being deferred and amortized over the 1-year term.
        Through
        September 30, 2005, the Company has recognized approximately $103,000 of
        expense.
  During
        the three months ended June 30, 2005, the Company issued 3,029,100 and 2,576,750
        common shares for conversion of $60,000 and $50,000 promissory notes ( see
        Note
        3).
  During
        the three months ended June 30, 2005, the Company issued 1,500,000 common
        shares
        for services provided at a value of $135,000 based on the $.09 quoted trade
        price on the grant date. The $135,000 was expensed immediately.
  During
        the three months ended September 30, 2005, the Company issued 5,334,000 shares
        of its common stock, valued at approximately $660,000 based on a $0.07 to
        $0.24
        market price of stock on dates of grant, to consultants for services, of
        which
        approximately $189,000 has been expensed through September 30, 2005, and
        $471,000 has been deferred under terms of agreements as deferred stock-based
        consulting, a component of stockholders’ deficit, at September 30,
        2005.
  During
        the three months ended September 30, 2005, the Company cancelled 1,115,000
        shares of its common stock issued during the three months ended March 31,
        2005
        to consultants for services to be provided, which were recorded as consulting
        fees expense of $148,000. During the three months ended September 30, 2005,
        the
        Company recorded a decrease in consulting expense in the amount originally
        recorded.
  In
        October 2005, the Company issued 744,542 shares of its common stock to an
        investment banker as consideration for services provided pursuant to terms
        of a
        corporate finance representation agreement in connection with Company borrowings
        in August 2005. At September 30, 2005, the Company has recorded common stock
        issuable of $745 and deferred debt issue costs of $74,454, representing the
        fair
        value of the shares as of the date of the fundraising transaction. Additionally,
        the Company has also recorded additional deferred debt issue costs of $135,000
        relating to warrants to be issued to the investment banker and another
        consultant for services provided in connection with the borrowing transaction.
        Warrants are for the purchase of 900,000 shares of common stock at a per
        share
        price of $0.001 for a term of 5 years (850,000 warrants) and 10 years (50,000
        warrants). During the three months ended September 30, 2005, approximately
        $140,000 of these debt issue costs have been amortized to interest
        expense.
  As
        described in Note 3, during the third quarter of 2005, the Company issued
        1,708,472 shares of its common stock upon conversion of a note payable, and
        issued certain convertible notes payable, which resulted in recording additional
        paid-in capital due to beneficial conversion features.
  Stock
        Options - The Company has adopted an incentive stock option plan (the “Plan”)
        under which options granted are intended to qualify as “incentive stock options’
        under Section 422A of the Internal Revenue Code of 1986, as amended. Pursuant
        to
        the Plan, options to purchase up to 275 shares of the Company’s common stock may
        be granted to employees of the Company. The Plan is administered by the Board
        of
        Directors which is empowered to determine the terms and conditions of each
        option subject to the limitation that the exercise price can not be less
        than
        market value of the common stock on the date of grant (110% of the market
        value
        in the case of options granted to an employee who owns 10% or more of the
        Company’s outstanding common stock) and no option can have a term in excess of
        10 years (5 years in the case of options granted to an employee who owns
        10% or
        more of the Company’s outstanding common stock). As of September 30, 2005, no
        Plan options have been granted.
  14
  2005
        Stock Plan - Effective pursuant to resolution of the Board of Directors on
        January 27, 2005 the Company adopted a 2005 Stock Plan to provide a source
        for
        the issuance of common stock of Itec in connection with compensatory programs
        sponsored by the Company and any other circumstances deemed by the Board
        of
        Directors as such a special situation. The number of shares available for
        granting awards under the Plan is 15,000,000 shares. The Plan is eligible
        to any employee of the Company, any individual who is a member of the board
        of
        directors of the Company or any individual performing services for the Company
        as a Non-employee Contractor and any individual who has accepted an offer
        of
        employment with the Company. Unless the Board of Directors determines otherwise,
        shares of non-vested Stock awarded to a Participant will be forfeited if
        the
        Participant terminates employment or service for any reason other than death,
        disability, retirement or involuntary termination.
  In
        May
        2001, the Company adopted the 2001 Stock Plan which covers the issuance of
        up to
        6,060 shares of common stock either directly or pursuant to options to eligible
        employees, directors, officers of and consultants and advisors of the Company.
        The Company filed a registration statement on Form S-8 with the Securities
        and
        Exchange Commission to register the shares covered under this Plan.
  In
        May
        2002, the Company established the 2002 Stock Plan which covers issuance of
        12,121 shares of common stock either directly or pursuant to options to eligible
        employees, directors, officers of and consultants and advisors of the Company.
        The Company filed a registration statement on Form S-8 with the Securities
        and
        Exchange Commission to register the shares covered under this Plan.
  In
        November 2002, the Company established the Itec Environmental Group, Inc.,
        2002
        Stock Plan which covers the issuance of 24,242 shares of common stock either
        directly or pursuant to options to eligible employees, directors, officers
        of
        and consultants and advisors of the Company. The Company filed a registration
        statement on Form S-8 with the Securities and Exchange Commission to register
        the shares covered under the Plan. In 2002, the Company issued 24,242 shares
        under the terms of this Plan.
  In
        March
        2003, the Company established the 2003 Stock Plan which covers the issuance
        of
        121,212 shares of common stock either directly or pursuant to options to
        eligible employees, directors, officers of and consultants and advisors of
        the
        Company. The Company filed a registration statement on Form S-8 with the
        Securities and Exchange Commission to register the shares covered under the
        Plan. In 2003, the Company issued warrants convertible into 1,212 shares
        of
        common stock under this plan to employees and consultants. The warrants have
        an
        exercise price of $6.60 per share. In 2003, the Company issued 60,845 shares
        under this plan.
  Issuance
        of Warrants - In February 2005, the Company issued to its CEO fully-vested,
        five-year warrants to purchase 2,457,370 shares of common stock at an exercise
        price of $0.06 per share. The warrants were valued at $172,106 which was
        expensed as compensation expense. In April 2005, the Company issued to its
        CEO
        fully-vested, five-year warrants to purchase 2,000,000 shares of common stock
        at
        an exercise price of $0.06 per share. The warrants were valued at $230,000,
        which was expensed as compensation expense.
  In
        April
        2005, the Company issued fully-vested, five-year warrants to consultants
        and
        advisors to purchase 2,750,000 shares of common stock at an exercise price
        of
        $0.06 per share. The company recorded consulting expense of $292,250
        related to these issuances. In June 2005, the Company issued fully-vested,
        five-year warrants to other consultants and advisors to purchase 2,100,000
        shares of common stock at exercise prices of $.05 for 100,000, $.09 for 500,000,
        $.10 for 1,000,000 and $.045 for 500,000. The warrants were valued at $149,700
        which was expensed as consulting fees.
  During
        the three months ended September 30, 2005, the Company issued warrants to
        a
        financial advisor for fund-raising services provided for the purchase of
        (i)
        500,000 shares at $0.10 per share for 10 years, (ii) 320,000 shares at $0.05
        per
        share for 5 years, (iii) 300,000 shares at $0.02 per share for 10 years,
        and
        (iv) 40,000 shares at $0.045 per share for 10 years. The estimated fair value
        of
        these warrants determined utilizing the Black-Scholes valuation model of
        approximately $197,200 has been recorded as deferred debt issue costs to
        be
        amortized to interest expense over the lives of the related borrowings. At
        September 30, 2005, approximately $132,100 has been amortized.
  As
        described in Note 3, in August 2005, the Company issued fully-vested ten-year
        warrants to lenders to purchase 9,938,439 shares of its common stock at a
        per
        share price of $0.001, and five-year warrants to lenders to purchase 300,000
        shares of its common stock at a per share price of $0.25.
  15
  Warrants have
        been granted at prices that are equal to, or more or less than the
        current
        fair value of the Company’s common stock at the date of grant. All warrants
        granted to date have been immediately vested have cash-less
        exercise
        rights and there were no defined terms for any underlying services. Therefore
        they were expensed at the grant date.
  The
        fair
        value of warrants issued during 2005 was estimated using the Black-Scholes
        option-pricing model with the following assumptions: a dividend yield of
        0%;
        expected volatility of 427%; risk-free interest rates of 3.6 to 4.3%; and
        expected lives of 5 and 10 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 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 stock warrants. The weighted-average
        fair value of warrants granted during the nine months ended September 30,
        2005
        was $0.10.
  The
        following summarizes stock options and warrants outstanding, all of which
        are
        exercisable, at September 30, 2005:
  Warrants
              
              
              Weightedaverageremaining
                    contractuallife
                    in years
              
              
              Weighted
                    averageexercise
                    priceWarrants
                  issued in 2002
              
              
              12,121
              
              
              2.3
              
              $
              29.70Warrants
                  issued in 2005
              
              
              20,705,809
              
              
              7.6
              
              
              0.0420,717,930
              
              
              7.6
              
              
              0.04
  The
        following summarizes warrants activity during the nine months ended September
        30, 2005:
  Warrants
              
              
              Weighted
                  averageexercise priceOutstanding
                  at December 31, 2004
              
              
              12,121
              
              $
              29.70Granted
              
              
              20,705,809
              
              
              0.04Outstanding
                  at September 30, 2005
              
              
              20,717,930
              
              
              0.04
  **Note
        5.  Related Party Transactions**
  In
        July
        2000, the Company's Board of Directors approved and authorized the Company
        to
        make a loan of $250,000 to the Company's Chief Executive Officer. The loan,
        according to the minutes of the Board meeting, is interest only for ten years
        with the total principal due at the end of ten years. As of September 30,
        2005,
        a balance of $147,973 (unchanged from December 31, 2004) was due.
  16
  In
        2004,
        the Company received advances totaling $50,000 from its Chief Financial Officer
        primarily to accommodate the working capital needs of the Company. Such advances
        are unsecured, bear interest at 10% and are due on demand. During the nine
        months ended September 30, 2005, the advances were repaid in full.
  In
        2004,
        the Company received advances totaling $76,100 from its Chief Executive Officer
        primarily to accommodate the working capital needs of the Company. Such advances
        are unsecured, bear interest at 10% and are due on demand. During the nine
        months ended September 30, 2005, $61,500 was repaid.
  The
        Company has an agreement with its attorney, who is a related party
        principal stockholder, for legal services whereby the attorney is periodically
        issued vested, non-forfeitable common shares of the Company and any proceeds
        from the sale of such shares by the related party are credited against invoice
        amounts due to that related party for legal services. The agreement has no
        stated term. Due to the contingent nature of the proceeds and the unstated
        term
        of the legal service agreement, the fair value of shares granted are expensed
        on
        the grant date. Legal fee invoices are accrued to accounts
        payable,
        periodically paid in cash and the accounts payable and legal expenses are
        credited for any proceeds in the period the proceeds are received by the
        related
        party and reported to the Company. During the nine months ended September
        30,
        2005, the Company issued approximately 9,957,700 shares of its common stock
        to the attorney, having a market value of $1,630,200 for legal services,
        which has been recorded as legal fees expense. Additionally, during the nine
        months ended September 30, 2005, the Company recorded an additional $1,177,418
        of legal fees expense representing the complete amortization of deferred
        fees
        recorded at December 31, 2004. At September 30, 2005, amounts due this
        shareholder of $394,960 are included in accounts payable - related
        party.
  **Note
        6. Commitments and Contingencies**
  The
        Company leases space for its recycling plant, research and development and
        offices in Riverbank, California pursuant to a March 2004 lease expiring
        in
        March 2009. Future minimum lease payments under the lease approximate $220,000
        during 2006 through 2008 and $37,000 in 2009.
  In
        November 2005, pursuant to an arbitration award, the Company has been ordered
        to
        pay EnvioPlastic Hungary the sum of $150,000, plus fees and costs, for the
        return of a deposit previously paid to the Company. The deposit of $75,000
        has
        previously been reported as deferred revenue, and has been reclassified to
        accrued liabilities at September 30, 2005. The Company has recorded an
        additional accrued liability and expense during the three months ended September
        30, 2005 to provide for the full amount of the award.
  **Note
        7. Proposed Merger**
  In
        May
        2005, the Company and its wholly owned subsidiary, Itec Acquisitions, Inc.,
        a
        Delaware corporation (“Merger Sub”) and Rose Waste Systems, Inc., a California
        corporation (“Rose Waste”) entered into an Agreement and Plan of Merger (the
“Agreement”) pursuant to which, at the Effective Time, (i) Merger Sub will merge
        with and into Rose Waste, Rose Waste will be the Surviving Corporation and
        the
        separate existence of Merger Sub will thereupon cease; (ii) each share of
        common
        stock of Merger Sub outstanding immediately prior to the Effective Time will
        convert into one (1) share of common stock of the Surviving Corporation;
        and
        (iii) each share of Rose Waste Common Stock outstanding immediately prior
        to the
        Effective Time will be converted and Itec will issue to George Gitschel,
        Rose
        Waste’s sole shareholder, 4,000,000 fully paid and nonassessable shares of Itec
        Common Stock, subject to certain adjustments (the “Merger Shares”). Further, the
        Merger Shares carry piggy-back registration rights. Consummation of the merger
        is conditional upon completion of certain closing conditions including, but
        not
        limited to, (a) Itec shall have received (i) no less than $3,000,000 pursuant
        to
        the offering of its securities, and (ii) the $2,000,000 loan from the CIWMB
        of
        the State of California (the “Financing”) within the one hundred and fifty (150)
        day period following the Effective Time, (b) George Gitschel shall have executed
        an Employment Agreement which shall be agreeable to both Itec and Mr. Gitschel,
        (c) George Gitschel and Itec shall have executed and delivered (a) the Pledge
        Agreement and (b) a Letter Agreement acceptable to them in their absolute
        discretion regarding Itec’s obligations (i) to maintain George Gitschel as a
        director and officer of Itec and the Surviving Corporation (ii) to support
        financially, operationally and administratively the Surviving Corporation
        as a
        separate entity, (iii) to permit Rose Waste to pay or distribute to George
        Gitschel as and when he elects Rose Waste cash equal to any unpaid
        profit
        of Rose Waste as of the Closing Date, and (iv) to permit Rose Waste to sell
        at
        cost to George Gitschel certain investments in other companies made by Rose
        Waste and not germane to its business (“Letter Agreement”), (d) Itec shall have
        adopted the New Itec Option Plan which shall be agreeable to both Itec and
        Mr.
        Gitschel, (e) Mr. George Gitschel shall be satisfied, in his sole and absolute
        discretion, with his due diligence review (including that of his professional
        advisors) of Itec including, but not limited to, their examination of the
        balance sheets, the patents licensed by Itec and the agreements relating
        thereto
        and the tax returns of Itec, and (f) Mr. George Gitschel shall have been
        appointed the Vice President of Business Development and to the Board of
        Directors of Itec and the Surviving Corporation.
  17
  Pending
        completion of the closing conditions set forth above, the merger consideration
        from Rose Waste will be held in escrow. Further, In the event (i) of a
        Bankruptcy, (ii) the terms of George Gitschel’s Employment Agreement with Itec,
        the Pledge Agreement or the Letter Agreement are violated, or (iii) the
        Financing is not completed on or before one hundred and fifty (150) days
        after
        the Effective Time, George Gitschel shall have the right to return the Merger
        Shares in exchange for all of the Rose Waste Common Stock as provided in
        the
        Pledge Agreement, thereby regaining control of Rose Waste.
  **Note
        8. Subsequent Events**
  Subsequent
        to September 30, 2005, the Company’s Board of Directors authorized the issuance
        of 21,750,000 warrants to purchase the Company’s common stock at $0.06 for ten
        years to certain of the Company’s officers and consultants, including 19,500,000
        to the Company’s Chief Executive Officer and 1,000,000 to the Company’s
        attorney, who is a more than 10% shareholder. The fair value of the warrants
        will be recorded as compensation expense and legal fees expense upon
        issuance.
  In
        October 2005, the Company announced that the California State Department
        of
        Conservation, Division of Recycling has issued a conditional loan guarantee
        commitment to the Company for $2,498,000.
  In
        November 2005, pursuant to the terms of a common stock purchase agreement,
        the
        Company issued for cash of approximately $167,000, 1,192,857 shares of its
        common stock and an option to purchase 9,521,429 shares (the "Option
        Shares"). The Option Shares are available for purchase by the holder at a
        per
        share price of $0.14, subject to redemption to $0.08 per share conditional
        upon
        when certain recycling volume and purity specifications. In addition, pursuant
        to terms of the common stock purchase agreement, the Company entered into
        a
        one-year consulting agreement with three individuals, providing for, among
        other
        things, issuance of 4,000,000 shares of Company common stock and payment
        of
        $15,000 per month.
  In
        October 2005, a convertible promissory note of
        $128,000 was converted to 2,937,937 common shares.
  18
  **Item
        2.**  **Management’s
        Discussion and Analysis or Plan of Operation**
  We
        use
        patented technology and proprietary equipment to recycle plastic. We license
        environmental technology using a carbon dioxide cleaning process from Honeywell.
         This new environmental technology, is believed by management to be
        the
        only pollution reduction and recycling system on the market today that allows
        for the 100% recycling of plastic motor oil containers and the residual oil
        left
        inside each container.  By using the carbon dioxide cleaning process,
        the
        Company can focus on environmental protection and environmental safety by
        creating no chemical waste disposal in the oil recycling and plastic recycling
        process.
  The
        Company has commenced construction of its first recycling line at its Riverbank
        plant. Equipment necessary to achieve plant production of 3,000 pounds per
        hour
        has been ordered and payments to equipment suppliers began in August. The
        production line is approximately 60% complete and Company management expects
        to
        start testing the solvent washing and CO2 portions of the system soon with
        production starting in January 2006.
  **Results
        of Operations -**We had revenue of $0 for the three and nine months
        ended September 30, 2005, compared with $0 and $1,750 for the three and nine
        month periods ended September 30, 2004. The nominal amount of revenue in
        2004
        and $0 in 2005 was a result of the change in business strategy from the
        marketing of equipment and licensing of the System technology, to building
        our
        own plant for the recycling of plastic. This change in business strategy
        required our management to focus their efforts on raising capital of
        approximately $7 million to fund our revised business strategy. We are a
        development stage company and accordingly have not as yet begun generating
        operational revenues.
  Total
        operating expenses for the three and nine month periods ended September 30,
        2005, were $3,137,486 and $6,255,162, representing increases of $2,573,216
        and
        $4,989,196, from the comparable periods in 2004. Increases in 2005 primarily
        were attributable to increases in legal and consulting fees for corporate
        financing and capital raising efforts, and to a lesser extent, increases
        in
        payroll. These increases were directly related to consultants, both legal
        and
        strategic business consultants, who have assisted us in our recapitalization
        efforts. Consulting and legal fees were approximately $2,742,316 and $5,007,208
        during the three and nine month periods ended September 30, 2005, respectively.
        Additionally, we granted fully-vested warrants to our Chief Executive Officer
        and Chief Financial Officer for their continued efforts in developing our
        business objectives. Pursuant to guidelines of SFAS 123R, we recorded the
        fair
        value of the warrants granted as compensation expense. All remaining payroll
        expenses represent payroll accruals for these same executive officers who
        are
        continuing to provide services without receiving full cash remuneration.
  During
        the nine months ended September 30, 2005, the Company issued approximately
        9,957,700 shares to its attorney, who is a greater than 10% shareholder,
        having
        a market value of approximately $1,630,200. The purpose of the issuances
        of the
        shares was to pay for current and future fees for strategic business consulting
        and legal services provided and to be provided relating to the equity
        restructuring of the company and recapitalization efforts. The issuance of
        these
        shares was necessary to secure the services of legal counsel as we continue
        our
        efforts to obtain additional capital. Additionally, during the three months
        ended September 30, 2005, the Company recorded an additional $1,177,418 of
        legal
        fees expense representing the complete amortization of deferred fees recorded
        at
        December 31, 2004.
  Also
        during the nine months ended September 30, 2005, the Company issued
        4,457,370 warrants to purchase Company common stock for $0.06 per share,
        to our
        CEO, and 250,000 warrants to our Chief Financial Officer, in recognition
        of
        their continuing efforts on behalf of the Company. We recognized compensation
        expense of approximately $402,000 related to these grants. We also issued
        additional warrants exercisable for approximately 5,760,000 shares of common
        stock to directors of the Company and consultants valued at $449,900 to be
        recognized over service periods as
        applicable.****
  The
        Company recorded interest expense of $1,150,126 and $1,266,516 for the three
        and
        nine month periods ended September 30, 2005, respectively, as compared to
        $40,108 and $242,348 for the three and nine month periods ended September
        30,
        2004. The increase is due to interest expense relating to borrowings during
        2005, the majority of which represents amortization of deferred debt issue
        costs
        and debt discount recorded in connection with such borrowings.
  Net
        loss
        increased for the three and nine month periods ended September 30, 2005 to
        $4,356,611 and $7,747,590, compared with $577,046 and $1,449,431 for the
        three
        and nine month periods ended September 30, 2004, respectively,  due
        primarily to increased consulting and professional fees and increased interest
        expense as described above.
  At
        September 30, 2005, the Company has substantial net operating loss
        carry-forwards available to offset future income taxes which expire through
        2024.  Realization is dependent on generating sufficient taxable income
        prior to expiration of the loss carry-forwards.  A change of greater
        than
        50% of the Company ownership could significantly reduce the availability
        of
        these tax credits.  The Company continues to provide a full valuation
        allowance to reduce its net deferred tax asset to zero, inasmuch as Company
        management has not determined that realization of deferred tax assets is
        more
        likely than not.
  19
  **Liquidity
        and Capital Resources -**Historically, our cash needs have been
        satisfied primarily through proceeds from private placements of our equity
        securities and other debt instruments.  We reasonably expect to continue
        to
        do so in the future, but cannot guarantee that such financing activities
        will be
        sufficient to fund our current and future projects and our ability to meet
        our
        cash and working capital needs.
  At
        September 30, 2005, we had a working capital deficit of $1,691,711, compared
        to
        a working capital deficit of $1,627,957 at December 31, 2004.  At
        September
        30, 2005, we had total assets of $3,378,861 and a total shareholders’ deficit of
        $2,333,960, compared with total assets of $423,149 and total stockholder's
        deficit of $1,906,260 at December 31, 2004. Total assets increased primarily
        due
        to the receipt of the $2,000,000 equipment acquisition/matching funds loan
        from
        the California Waste Management Board (CIWMB) and of $600,000 of borrowings
        designated for equipment matching purchases and related equipment purchases.
        At
        September 30, 2005, there was cash of $1,289,192 being held in an escrow
        account
        for release upon presentation of equipment purchase invoices, and approximately
        $1,220,000 of recycling plant construction in progress.
  During
        the nine months ended September 30, 2005, cash used by operating activities
        increased to $999,816, due primarily to increased net loss of $ 7,747,590
        offset primarily by $2,943,007 stock based expenses, $1,177,418 amortization
        of
        deferred legal fees, $762,025 amortization of debt's discount, $515,864 loss
        on
        debt conversion, $292,390 gain on debt settlement and a $628,290 of net changes
        in operating assets. During the nine months ended September 30, 2005,
        cash
        used by investing activities was $1,262,849, due to building our recycling
        plant. During the nine months ended September 30, 2005, we received $1,907,302
        in proceeds from notes payable and $700,808 in fund draws from our restricted
        cash escrow account while repaying $201,853 in loans.  For the comparable
        period in 2004, we had an increase in notes payable of $527,700.
  At
        September 30, 2005, the Company does not have sufficient cash and restricted
        cash to meet its needs for the next twelve months. However, the Company
        continues to be in the process of raising funds, and Company management
        anticipates being able to raise sufficient cash to meet the Company’s needs
        through 2006. There is no guarantee, however, that efforts will result in
        Itec
        raising cash in amounts sufficient to meet the Company’s needs.
  **Off-Balance
        Sheet Arrangements -** We do not have any off balance sheet arrangements
        that have or are likely to have a material current or future effect on the
        Company's financial condition, or changes in financial condition, liquidity
        or
        capital resources or expenditures.
  **Strategic
        Alliances -** The Company continues to engage in discussions for the
        purpose of entering into manufacturing, technology and sales
        alliances.  Additionally, the Company is also seeking acquisitions
        or
        business opportunities to, among other things, increase revenues and improve
        stockholder value, which businesses or lines of business may or may not relate
        to the current core business of the Company. In this regard, in May 2005,
        the
        Company has entered into an Agreement and Plan of Merger with Rose Waste
        Systems, Inc., pursuant to which the companies would merge, which is subject
        to
        completion of closing conditions as described in Note 7 to the condensed
        consolidated financial statements included in this Form 10-QSB.
  20
  **Significant
        Accounting Policies and Estimates -**The preparation of financial
        statements included in this Quarterly Report on Form 10-QSB requires management
        to make estimates and assumptions that affect the reported amounts of assets
        and
        liabilities at the date of the financial statements and the reported amounts
        of
        revenues and expenses during the reporting period.  On an on-going
        basis,
        management evaluates its estimates and judgments. Management bases its estimates
        and judgments on historical experiences and on various other factors that
        are
        believed to be reasonable under the circumstances, the results of which form
        the
        basis for making judgments about the carrying value of assets and liabilities
        that are not readily apparent from other sources.  Actual results
        may
        differ from these estimates under different assumptions or conditions.  The
        more significant accounting estimates inherent in the preparation of the
        Company's financial statements include estimates as to the valuation of equity
        related instruments issued, and valuation allowance for deferred income tax
        assets. Our accounting policies are described in the notes to financial
        statements included in this Quarterly Report on Form 10-QSB and in our December
        31, 2004 Annual Report on Form l0-KSB. The more critical accounting policy
        is
        the presentation of financial statements on a going concern basis, as described
        below.
  The
        accompanying consolidated financial statements have been prepared in conformity
        with generally accepted accounting principles, which contemplate continuation
        of
        the Company as a going concern. The Company has incurred recurring losses
        from
        operations and has a net working capital deficiency and net capital deficiency
        that raises substantial doubt about its ability to continue as a going concern.
        The Report of Independent Certified Public Accountants included in the Company’s
        December 31, 2004 Annual Report on Form 10-KSB stated that these conditions
        raise substantial doubt about the Company’s ability to continue as a going
        concern.
  Company
        management intends to raise additional debt and/or equity financing to fund
        future operations and to provide additional working capital. However, there
        is
        no assurance that such financing will be obtained in sufficient amounts
        necessary to meet the Company’s needs.
  The
        accompanying consolidated financial statements do not include any adjustments
        to
        reflect the possible future effects on the recoverability and classification
        of
        assets or the amounts and classifications of liabilities that may result
        from
        the outcome of this uncertainty.
  21
 **Item
        3.**  **Controls
        and Procedures**
  Under
        the
        supervision and with the participation of our management, including the Chief
        Executive Officer and Chief Financial Officer, we have evaluated the
        effectiveness of our disclosure controls and procedures pursuant to Exchange
        Act
        Rule 13a-15(b) as of the end of the period covered by this report. Based
        on that
        evaluation, the Chief Executive Officer and Chief Financial Officer have
        concluded that these disclosure controls and procedures are effective. There
        were no changes in our internal control over financial reporting during the
        quarter ended September 30, 2005 that have materially affected, or are
        reasonably likely to materially affect, our internal control over financial
        reporting.
  22
 **PART
        II - OTHER INFORMATION**
  **Item
        1.**  **Legal
        Proceedings**
  An
        award
        was entered against Itec by the International Centre for Dispute Resolution
        (the
        "ICDR") on August 26, 2005 in the amount of $174,591.25. Itec is in the process
        of negotiating a settlement agreement with the Claimant in the ICDR proceeding
        (the "Claimant"), in order to reduce the award.
  **Item
        2.**  **Unregistered
        Sales of Equity Securities and Use of Proceeds**
  Pursuant
        to the “safe harbor” private offering exemption provided by Rule 506 of
        Regulation D under Section 4(2) and of the Securities Act of 1933 (the
“Exemption”), on August 4, 2005 Itec Environmental Group, Inc., a Delaware
        corporation (the “Company” or “Itec”) approved, and are awaiting signed, certain
        material definitive agreements with Capital Growth Equity Fund I, LLC, a
        Florida
        limited liability company ( “CGF”) including, but not limited to the following:
        (i) a Loan Agreement, (ii) a $100,000 Senior Secured Convertible Promissory
        Note, and (iii) a Common Stock Purchase Warrant to purchase 1,418,439 shares,
        exercise price of $.001 per share (collectively the “CGF Transaction
        Documents”).
  Pursuant
        to the CGF Transaction Documents, CGF loaned to Itec $100,000 (the “CGF
        Loan”),  and Itec and CGF have agreed to the principal terms of a
        restructuring agreement in regards to repayment of the CGF Loan. In connection
        with the CGF Loan, CGF received a Common Stock Purchase Warrant to purchase
        1,418,439 shares of Itec. The shares of common stock underlying the warrant
        are
        exerciseable for $.001 per share.
  In
        August
        and September, 2005 Itec entered into certain material definitive agreements
        with twelve individual investors (the “CGF Investors”) including, but not
        limited to the following: (i) Loan Agreements, (ii) Senior Secured Convertible
        Promissory Notes $500,000 in the aggregate, and (iii) Common Stock Purchase
        Warrants to purchase an aggregate of 500,000 shares, exercise price of $.13
        per
        share (collectively the “CGF Investors Transaction Documents”).
  Pursuant
        to the CGF Investors Transaction Documents, the CGF Investors loaned Itec
        $500,000 (the “CGF Investor Loan”), which shall be repaid by Itec upon the
        earlier of either (i) December 14, 2005, or (ii) completion of the contemplated
        financing through Itec’s investment bank, BMCI of $7,500,000 in the aggregate
        (the “Financing”). In connection with the CGF Investor Loan, the CGF Investors
        may receive Common Stock Purchase Warrants to purchase in the aggregate,
        500,000
        shares of Itec common stock, if the CGF Investor Loan is not converted into
        stock pursuant to the promissory notes. The shares of common stock underlying
        the warrant are exerciseable at an exercise price of $.13 per
        share.
  On
        September 23, 2005, pursuant to the Exemption, the Company issued (i) 744,655
        shares of the Company's common stock to BMCI, pursuant to the engagement
        agreement for certain corporate finance and investment banking services being
        provided pursuant to the corporate finance representation agreement between
        the
        parties entered into in May of 2005. The BMCI shares carry piggyback
        registration rights for the first registration statement filed by the
        Company.
  Pursuant
        to the Exemption, in September and October, 2005 Itec entered into certain
        material definitive agreements with three individual investors (the “KW
        Investors”) including, but not limited to the following: (i) Loan Agreements and
        (ii) $150,000 Senior Secured Convertible Promissory Notes (collectively the
“KW
        Investors Transaction Documents”).
  23
  Pursuant
        to the KW Investors Transaction Documents, the KW Investors loaned Itec $150,000
        (the “KW Loan”), which shall be repaid by Itec upon the earlier of either (i)
        February 2, 2005, or (ii) completion of the contemplated financing through
        Itec’s investment bank, BMCI of $7,500,000 (the “Financing”). In connection with
        the KW Loan, the KW Investors may receive Common Stock Purchase Warrants
        to
        purchase 150,000 shares in the aggregate of Itec common stock, if the KW
        Loan is
        not converted into stock pursuant to the promissory notes. The shares of
        common
        stock underlying the warrant are exerciseable for $.13 per share.
  Pursuant
        to the Exemption, in November, 2005 Itec entered into certain material
        definitive agreements with Tiger Paw Capital Corp., a Canadian corporation
        (“Tiger”), upon receipt of the approved agreements, including, but not limited
        to the following: (i) a Common Stock Purchase Agreement, (ii) an Investor
        Rights
        Agreement, (iii) a Right of First Refusal Agreement, (iv) a Covenant to Adjust,
        and (v) a Consulting Agreement (collectively the “Tiger Transaction
        Documents”).
  Pursuant
        to the Tiger Transaction Documents, Tiger purchased 1,192,857 shares of Itec
        common stock for a purchase price of $167,000 (the “Sale”) and has the option to
        purchase an additional 9,404,718 shares of Itec common stock at $.14 per
        share.
  **Item
        3.**  **Defaults
        Upon Senior Securities**
  Itec
        is
        currently in default of a loan agreement which was entered into on August
        18,
        2005, with The Elevation Fund, LLC, a Delaware limted liability company
        ("Elevation"), and Itec is in default of a loan agreement which was entered
        into
        on August 4, 2005, with CGF. Itec, Elevation and CGF have agreed in principal
        to
        the terms of a restructuring agreement, which has been submitted to all parties
        for approval.
  **Item
        4.**  **Submission
        of matters to a Vote of Securities Holders**
  None
  **Item
        5.**  **Other
        Information**
  None
  **Item
        6.**  **Exhibits**
  (a)
        Form
        8-K Filings
  On
        August
        24, 2005, Itec filed a Form 8-K, disclosing under Item 1.01 ("Entry into
        a
        Material Definitive Agreement"), that pursuant to the “safe harbor” private
        offering exemption provided by Rule 506 of Regulation D under Section 4(2)
        and
        of the Securities Act of 1933 (the “Exemption”), on August 18, 2005 Itec entered
        into certain material definitive agreements with Elevation including, but
        not
        limited to the following: (i) Loan Agreement, (ii) $600,000 Senior Secured
        Convertible Promissory Note, (iii) Common Stock Purchase Warrant to purchase
        8,500,000 shares, exercise price of $.001 per share, and (iv) Security Agreement
        (collectively the “Transaction Documents”).
  (b)
        Exhibits
  Exhibit
                      No.
                  Description
  3.1(i)
                  Amendment
                      to Restated Certificate of Incorporation*3.2(i)
                  Restated
                      Certificate of Incorporation*3.3(i)
                  Certificate
                      of Incorporation*3.4(ii)
                  Bylaws*10.1
                  Form
                      of Loan Agreement with Capital Growth Equity Fund I, LLC
                      Attached10.2
                  Form
                      of Promissory Note with Capital Growth Equity Fund I, LLC
                      Attached10.3
                  Form
                      of Common Stock Purchase Warrant for Capital Growth Equity
                      Fund I, LLC
                      Attached10.4
                  Form
                      of Loan Agreement with Capital Growth Investors
                      Attached10.5
                  Form
                      of Promissory Note with Capital Growth Investors
                      Attached10.6
                  Form
                      of Common Stock Purchase Warrant for Capital Growth Investors
                      Attached10.7
                  Form
                      of Loan Agreement with KW Investors Attached10.8
                  Form
                      of Promissory Note with KW Investors Attached10.9
                  Form
                      of Common Stock Purchase Warrant of KW Investors
                      Attached10.10
                  Form
                        of Common Stock Purchase Agreement with Tiger Paw Capital
                        Corp.
                        Attached10.11
                  Form
                        of Investor Rights Agreement with Tiger Paw Capital Corp.
                        Attached10.12
                  Form
                      of Right of First Refusal Agreement with Tiger Paw Capital
                      Corp.
                      Attached10.13
                  Form
                      of Covenant to Adjust with Tiger Paw Capital Corp.
                      Attached10.14
                  Form
                    of Consulting Agreement with Tiger Paw Capital Corp.Attached10.15
                  Form
                    of Conditional Approval Letter from California Department
                    of
                    Conservation, Division of Recycling Attached10.16
                  Form
                    of Conditional
                    Commitment for Guarantee from California Department of Conservation,
                    Division of Recycling Attached31.1
                  Certification
                      of CEO pursuant to Section 302 of the Sarbanes-Oxley Act
                      Attached31.2
                  Certification
                      of CFO pursuant to Section 302 of the Sarbanes-Oxley Act
                      Attached32
                  Certification
                      of CEO and CFO pursuant to Section 906 of the Sarbanes-Oxley
                      Act
                      Attached
  *
            Previously filed
  24
 **SIGNATURES**
  Pursuant
          to the requirements of the Securities Exchange Act of 1934, as amended,
          this
          report has been signed by the following persons on behalf of the Registrant
          in
          the capacities and on the dates indicated.
  **ITEC
                  ENVIRONMENTAL GROUP, INC.**November
                  14,
                  2005
                
                
                /s/
                  Gary M. De
                  LaurentiisGary
                  M.
                  De LaurentiisChairman
                  & Chief Executive OfficerNovember
                  14,
                  2005
                
                
                /s/
                  Gary M. De
                  LaurentiisGary
                  M.
                  De LaurentiisChairman
                  & Chief Executive Officer(Principal
                  Executive Officer)November
                  14,
                  2005
                
                
                /s/
                    Frederick Smith, Jr.Frederick
                    Smith, Jr.Chief
                  Financial Officer(Principal
                  Financial
                  Officer)
   25
 EXHIBIT
          INDEX
 Exhibit
                        No.
                    Description
 3.1(i)
                Amendment
                    to Restated Certificate of Incorporation*, Incorporated by reference
                    to
                    Exhibit A to the DEFR14C Filed by the Company on November 30,
                    20043.2(i)
                Restated
                    Certificate of Incorporation*, Incorporated by reference to Exhibit
                    B to
                    the DEFR14C Filed by the Company on September 9, 20023.3(i)
                Certificate
                    of Incorporation*, Incorporated by reference to the Form S-19
                    Registration
                    Statement Filed by the Company, File No. 33-31-673.4(ii)
                Bylaws*,
                    Incorporated by reference to Exhibit B to the DEF-14C filed by
                    the Company
                    on September 9, 200210.1
                Form
                    of Loan Agreement with Capital Growth Equity Fund I,
                    LLC10.2
                Form
                    of Promissory Note with Capital Growth Equity Fund I,
                    LLC10.3
                Form
                    of Common Stock Purchase Warrant for  Capital Growth
                    Equity Fund
                    I, LLC10.4
                Form
                    of Loan Agreement with Capital Growth Investors10.5
                Form
                    of Promissory Note with Capital Growth Investors10.6
                Form
                    of Common Stock Purchase Warrant for Capital Growth
                    Investors10.7
                Form of
                  Loan Agreement
                  with KW Investors10.8
                Form of
                  Promissory Note
                  with KW Investors10.9
                Form of
                  Common Stock
                  Purchase Warrant for KW Investors10.10
                Form
                    of Common Stock Purchase Agreement with Tiger Paw Capital
                    Corp.10.11
                Form
                    of Investor Rights Agreement with Tiger Paw Capital
                    Corp.10.12
                Form
                    of Right of First Refusal Agreement with Tiger Paw Capital
                    Corp.10.13
                Form
                    of Covenant to Adjust with Tiger Paw Capital Corp.10.14
                Form
                    of Consulting Agreement with Tiger Paw Capital Corp.10.15
                Form
                    of Conditional Approval Letter from California Department of
                    Conservation,
                    Division of Recycling10.16
                Form
                    of Conditional Commitment for Guarantee from California Department
                    of
                    Conservation, Division of Recycling31.1
                Certification
                    of CEO pursuant to Section 302 of the Sarbanes-Oxley
                    Act31.2
                Certification
                    of CFO pursuant to Section 302 of the Sarbanes-Oxley
                    Act32
                Certification
                    of CEO and CFO pursuant to Section 906 of the Sarbanes-Oxley
                    Act
  *
          Previously filed
 
 26