**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 JUNE 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)
      881-3523


(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 [  ]




The
      number of shares of the Company's common stock outstanding on June 30, 2005:
      33,360,960














**ITEC
      ENVIRONMENTAL GROUP, INC.**


**FORM
      10-QSB**









TABLE
      OF CONTENTS





PART
      I  FINANCIAL
      INFORMATION





Item
      1  Financial
      Statements





Item
      2  Management's
      Discussion and Analysis or Plan of Operation





Item
      3  Controls
      and Procedures








PART
      II  OTHER
      INFORMATION





Item
      1  Legal
      Proceedings





Item
      2  Unregistered
      Sales of Equity Securities and Use of Proceeds





Item
      3  Defaults
      Upon Senior Securities





Item
      4  Submission
      of Matters to a Vote of Security Holders





Item
      5  Other
      Information





Item
      6  Exhibits







SIGNATURES







1





**PART
      I - FINANCIAL INFORMATION**







**Item
      1.**  **Financial
      Statements**




**ITEC
          Environmental Group, Inc.**
 **A
            Development Stage Company**
 **Condensed
              Consolidated Balance Sheets**
 **(Unaudited)**
  June
                        30, 2005Current
                        assetsCash
                        and cash equivalents
                    
                    $
                    19,990Total
                        current assets
                    
                    
                    19,990Property
                        and equipment, net
                    
                    
                    174,036Notes
                        receivable - officer
                    
                    
                    147,973Deposits
                        and other assets
                    
                    
                    71,760Restricted
                        cash held in escrow
                    
                    
                    1,990,000Total
                        assets
                    
                    $
                    2,403,759Current
                        liabilitiesAccounts
                        payable
                    
                    $
                    569,167Accounts
                        payable-related party
                    
                    
                    460,706Accrued
                        payroll
                    
                    
                    633,288Accrued
                        liabilities - officer
                    
                    
                    127,125Accrued
                        liabilities
                    
                    
                    248,685Current
                        portion of capital lease obligations
                    
                    
                    16,344Notes
                        payable, net of debt discount of $103,669
                    
                    
                    263,631Notes
                        payable - officers
                    
                    
                    80,600Total
                        current liabilities
                    
                    
                    2,399,546Non-current
                        liabilitiesNotes
                        payable - Italian investors
                    
                    
                    353,980Capital
                        lease obligations, net of current portion
                    
                    
                    14,494Deferred
                        revenues
                    
                    
                    200,001Notes
                          payable to California Integrated Wast Management Board,
                          net of debt
                          discount of $10,000
                    
                    
                    1,990,000Total
                        non-current liabilities
                    
                    
                    2,558,475Total
                        liabilities
                    
                    
                    4,958,021Commitments
                        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, 32,190,505
                          shares issued and outstanding
                    
                    
                    32,191Additional
                        paid-in capital
                    
                    
                    12,907,199Deferred
                        stock-based consulting and legal costs
                    
                    
                    (2,041,173
                    )Accumulated
                        deficit during the development stage
                    
                    
                    (13,452,479
                    )Total
                        stockholders' deficit
                    
                    
                    (2,554,262
                    )Total
                        liabilities and stockholders' deficit
                    
                    $
                    2,403,759
  See
            accompanying notes to condensed consolidated financial statements.


2




**ITEC
        Environmental Group, Inc.**
 **A
          Development Stage Company**
 **Condensed
            Consolidated Statements of Operations**
 **(Unaudited)**
  Inception(March
                  28,2000)to-date
                  throughThree
                  months ended June 30,
              
              Six
                  months ended June 30,
              
              June
                    30,2005
              
              2004
              
              2005
              
              2004
              
              2005Revenue
              
              $
              —
              
              $
              —
              
              $
              —
              
              $
              1,750
              
              $
              494,387Cost
                  of goods sold
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              295,977Gross
                  profit
              
              
              —
              
              
              —
              
              
              
              
              
              1,750
              
              
              198,410Operating
                  expensesPlant
                  expenses
              
              
              1,391
              
              
              17,482
              
              
              5,151
              
              
              23,117
              
              
              183,134Payroll
              
              
              330,900
              
              
              125,497
              
              
              586,316
              
              
              225,082
              
              
              2,722,486Consulting
                  and legal fees
              
              
              1,502,894
              
              
              138,801
              
              
              2,264,892
              
              
              256,602
              
              
              7,264,964Research
                  and development
              
              
              —
              
              
              12,000
              
              
              —
              
              
              12,000
              
              
              177,490General
                  and administrative
              
              
              169,971
              
              
              117,575
              
              
              236,753
              
              
              154,209
              
              
              2,539,421Depreciation
                  and amortization
              
              
              12,282
              
              
              16,231
              
              
              24,564
              
              
              32,436
              
              
              180,679Total
                  operating expenses
              
              
              2,017,438
              
              
              427,586
              
              
              3,117,676
              
              
              703,446
              
              
              13,068,174Loss
                  from operations before interest
              
              
              (2,017,438
              )
              
              (427,586
              )
              
              (3,117,676
              )
              
              (701,696
              )
              
              (12,869,764
              )Other
                  expense (income)Interest
                  expense
              
              
              101,338
              
              
              137,136
              
              
              116,390
              
              
              202,240
              
              
              800,998Loss
                  on conversion of notes payable for stock
              
              
              156,140
              
              
              —
              
              
              156,140
              
              
              —
              
              
              156,140Gain
                  from extinguishment of debt
              
              
              —
              
              
              —
              
              
              —
              
              
              
              
              
              (634,211
              )Other
                  expense (income)
              
              
              —
              
              
              (32,351
              )
              
              (27
              )
              
              (31,551
              )
              
              254,040Total
                  other expense
              
              
              257,478
              
              
              104,785
              
              
              272,503
              
              
              170,689
              
              
              576,967Net
                  loss before income taxes
              
              
              (2,274,916
              )
              
              (532,371
              )
              
              (3,390,179
              )
              
              (872,385
              )
              
              (13,446,731
              )Provision
                  for income taxes
              
              
              —
              
              
              —
              
              
              800
              
              
              —
              
              
              (5,748
              )Net
                  loss
              
              $
              (2,274,916
              )
              $
              (532,371
              )
              $
              (3,390,979
              )
              $
              (872,385
              )
              $
              (13,452,479
              )Basic
                  and diluted net loss per share
              
              $
              (0.09
              )
              $
              (0.60
              )
              $
              (0.22
              )
              $
              (1.18
              )
              $
              (6.64
              )Weighted
                    average shares usedin computing loss per share
              
              
              24,427,954
              
              
              885,865
              
              
              15,711,856
              
              
              740,345
              
              
              2,025,751


See
      accompanying notes to condensed
      consolidated financial statements.






3


**ITEC
          Environmental Group, Inc.**
 **A
          Development Stage Company**
 **Condensed
          Consolidated Statements of Cash Flows**
 **(Unaudited)**
 Inception(March
                    28,2000)to-date
                    throughSix
                    months ended June 30,
                
                June
                    30,2005
                
                2004
                
                2005Cash
                    flows from operating activities:Net
                    loss
                
                $
                (3,390,979
                )
                $
                (872,385
                )
                $
                (13,452,479
                )Adjustments
                    to reconcile net loss to net cashused  by
                    operating activities:Depreciation
                    and amortization expense
                
                
                19,564
                
                
                27,436
                
                
                130,680Amortization
                    of license fees
                
                
                5,000
                
                
                5,000
                
                
                50,000Gain
                    on extinguishment of debt
                
                
                —
                
                
                —
                
                
                (634,211
                )Loss
                    on conversion of debt for common stock
                
                
                156,140
                
                
                
                
                
                156,140Issuance
                    of common stock for services
                
                
                1,032,550
                
                
                78,494
                
                
                4,590,598Issuance
                    of common stock for compensation
                
                
                —
                
                
                40,000
                
                
                312,500Amortization
                    of deferred fees
                
                
                433,622
                
                
                —
                
                
                433,622Beneficial
                    conversion of convertible debt
                
                
                60,000
                
                
                —
                
                
                60,000Amortization
                    of debt issue costs and discount
                
                
                24,331
                
                
                164,214
                
                
                24,331Issuance
                    of warrants
                
                
                843,966
                
                
                1,000
                
                
                849,966Other
                
                
                —
                
                
                (4,000
                )
                
                —Changes
                    in operating assets and liabilities:Other
                    assets
                
                
                —
                
                
                (4,345
                )
                
                (17,250
                )Accounts
                    receivable
                
                
                —
                
                
                (28,352
                )
                
                —Prepaid
                    expenses and deposits
                
                
                (550
                )
                
                (107,748
                )
                
                (54,509
                )Accounts
                    payable
                
                
                385,518
                
                
                87,727
                
                
                1,315,372Income
                    taxes payable
                
                
                —
                
                
                (800
                )
                
                —Accrued
                    liabilities
                
                
                188,161
                
                
                113,634
                
                
                1,174,339Deferred
                    revenue
                
                
                —
                
                
                —
                
                
                475,190Net
                    cash used by operating activities
                
                
                (242,677
                )
                
                (500,125
                )
                
                (4,585,711
                )Cash
                    flows from investing activities:Purchase
                    of property, plant & equipment
                
                
                —
                
                
                —
                
                
                (255,688
                )Purchase
                    of license fees
                
                
                —
                
                
                —
                
                
                (50,000
                )Advances
                    made on notes receivable from officer
                
                
                —
                
                
                —
                
                
                (147,973
                )Net
                    cash used by investing activities
                
                
                —
                
                
                —
                
                
                (453,661
                )Cash
                    flows from financing activities:Proceeds
                    from CIWMB notes payable
                
                
                2,000,000
                
                
                —
                
                
                2,000,000Increase
                    in restricted cash in escrow
                
                
                (2,000,000
                )
                
                —
                
                
                (2,000,000
                )Principal
                    payments on capital lease obligations
                
                
                (3,199
                )
                
                —
                
                
                (18,190
                )Proceeds
                    from sale of common stock
                
                
                —
                
                
                —
                
                
                1,821,494Proceeds
                    from issuance of notes payable
                
                
                306,000
                
                
                500,000
                
                
                3,352,558Payments
                    on notes payable - officers
                
                
                (45,500
                )
                
                —
                
                
                (96,500
                )Net
                    cash provided  by financing activities
                
                
                257,301
                
                
                500,000
                
                
                5,059,362Net
                    increase (decrease) in cash and cash equivalents
                
                
                14,624
                
                
                (125
                )
                
                19,990Cash
                    and cash equivalents, beginning of period
                
                
                5,366
                
                
                125
                
                
                —Cash
                    and cash equivalents, end of period
                
                $
                19,990
                
                $
                —
                
                $
                19,990**Supplemental
                    disclosures of cash flow information:**Cash
                    paid for interest
                
                $
                —
                
                $
                —
                
                $
                109,647Cash
                    paid for income taxes
                
                $
                800
                
                $
                1,600
                
                $
                4,800Non-cash
                    investing and financing activitiesCommon
                    stock issued for services
                
                $
                756,250
                
                $
                118,494
                
                $
                4,314,298Common
                    stock issued for compensation
                
                $
                —
                
                $
                —
                
                $
                312,500Common
                    stock issued for debt conversion
                
                $
                110,000
                
                $
                60,000
                
                $
                3,201,408Common
                    stock issued for future legal fees
                
                $
                305,000
                
                $
                —
                
                $
                1,482,418Warrants
                    issuance
                
                $
                843,966
                
                $
                1,000
                
                $
                849,966


See
      accompanying notes to condensed consolidated
      financial statements.


4


**ITEC
      Environmental Group, Inc. and Subsidiaries**


**A
        Development-Stage Company**
 **Notes
        to Consolidated Financial Statements**
 **June
        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 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 consolidated
        financial statements.
 
 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 attempt
        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. In the future, the Company will market
        its
        technology in the United States and other countries. The initial focus of
        the
        Company’s research and development efforts will be 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.
 
 Our
        plan
        for the next twelve months is opening a plastic recycling plant in Stanislaus
        County, California. We have signed a five year lease on a building and have
        moved all equipment necessary for the plastic recycling plant to our new
        plant
        in Riverbank, California. The recycling pilot plant commenced operations
        in 2003
        and was located in Oakdale, California.
 
 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 6, in August 2005 the Company
        received an investment commitment and deposited funds sufficient to enable
        the
        Company to begin construction on and ordering equipment for its recycling
        plant.
 
 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 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 capital deficiency that raises substantial doubt
        about
        its ability to continue as a going concern. The Company incurred a net loss
        of
        $3,390,979 during the six months ended June 30, 2005, and, as of that date,
        had
        a working capital deficiency of $2,379,556 and net capital deficiency of
        $2,554,262, which includes accumulated losses from March 28, 2000 (inception)
        to
        June 30, 2005 of $13,452,479.
 
 5
 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, continuing 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. Management plans to pursue financing arrangements and aggressive
        sales of equipment to remedy the capital and loss circumstances to provide
        the
        opportunity for the Company to continue as a going concern.
  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 possible inability of the Company to continue as a going concern.
  Interim
        financial statements -
        The
        accompanying unaudited interim consolidated financial statements represent
        the
        financial activity of ITec and its subsidiaries. The consolidated financial
        statements for the interim periods ended June 30, 2005 and June 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.
        Accordingly, the 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
        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 statements The
        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.
  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. Funds received have
        been
        placed in escrow, with draws to be 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. As disclosed in Note 6 - Subsequent Events the Company
        expects to draw on these escrow funds during the three months ending September
        30, 2005.
 
 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.
 
 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.
 
 6
 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 or warrants. 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 June
        30,
        2004, exclude 12,121 shares relating to common shares issuable upon exercise
        of
        outstanding options. Computations of net loss per share for the periods ended
        June 30, 2005, exclude 9,307,370 shares relating to common shares issuable
        upon
        exercise of outstanding warrants, 2,844,444 shares relating to common shares
        issuable upon conversion of convertible notes payable, and 12,121 shares
        relating to common shares issuable upon exercise of outstanding options.
        These
        common stock equivalents could have the effect of decreasing diluted income
        per
        share in future periods.
 
 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 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 classifications.
 
 7
 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 periods after the end of the initial five-year 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.
  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
        June 30, 2005 was $50,000, and the net book value at June 30, 2005 was
        $0.
  8
 Note
        3.Notes
        Payable
 
 Pursuant
        to terms of Business Loan Agreement, Security Agreements, and $2,000,000
        Promissory Note entered into in May 2005, 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 the
        lender.
        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 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 plan, a secondary security
        interest in all other machinery and equipment and other assets owned by the
        Company, 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, including The Elevation Fund commitment, as described
        in Note 7. $80,000 of the funds are reserved for interest payments on the
        note.
        As of August 15, 2005, the Company had not drawn funds from the escrow account.
        The lender fee is recorded as a debt discount to be amortized over the 10-year
        loan term.
 
 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 needs. 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 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 June 30,
        2005.
 
 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 a per share
        price
        of $0.045. 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. During the three
        months ended June 30, 2005, $24,330 of the debt discount was 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 - During the three months ended March 31, 2005,
        the
        Company issued 5,000,000 shares of stock, valued at $845,000, based on a
        $0.17
        market price on date of grant to a related party for prepaid legal services.
        The
        $845,000 is deferred and proceeds from the sale of such shares by the legal
        service provider are credited against accounts payable recorded and due the
        provider with a corresponding credit to deferred expenses. The company also
        issued an additional 4,956,545 shares, valued at $618,160 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.
        As
        described in Note 3, in July 2005, the Company received and cancelled 1,342,692
        shares of common stock, which were issued during the three months ended March
        31, 2005.
 
 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
        issue to thed 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 agreement
        term, The Company recognized $41,058 of expense as of June 30,
        2005.
 
 9
 During
        the three months ended June 30, 2005, the Company issued 3,500,000 shares
        of
        stock, valued at $305,000, based on a $0.08 to $0.09 market price of stock
        on
        dates of issuance, to a related party for prepaid legal services, which was
        recorded as a deferred stock-based consulting component of stockholders’
        deficit. Proceeds from the sale of such shares by the legal service provider
        are
        credited against accounts payable recorded and due the provider with a
        corresponding credit to deferred expenses.
 
 The
        company issued an additional 6,237,220 shares, valued at $541,350, based
        on a
        $0.08 to $0.09 market price of stock on dates of grant, to other consultants
        for
        services, of which approximately $256,000 has been expensed during the three
        months ended and $286,000 has been deferred under terms of agreements as
        deferred stock-based consulting, a component of stockholders’ deficit, at June
        30, 2005.
 
 As
        described in Note 3, during the six months ended June 30, 2005, the Company
        issued shares of its common stock upon conversion of certain notes 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 June 30, 2005, no Plan
        options have been granted.
 
 2005
        Stock Plan - Effective pursuant to resolution of the Board of Directors January
        27, 2005 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 shall be 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 of 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.
 
 10
 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, legal and consulting expense.
 
 In
        April
        2005, the Company issued fully-vested, five-year warrants to purchase 4,750,000
        shares of common stock at an exercise price of $0.06 per share. The company
        recorded compensation expense of $522,250 related to these issuances. In
        June
        2005, the Company issued fully-vested, five-year warrants 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.
 
 Options
        and warrants are granted have been 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.
        The Company records compensation expense on options granted based on fair
        value
        using the Black-Scholes method. The vesting period is determined by the Board
        of
        Directors. All warrants granted to date are immediately vested and there
        were no
        defined terms for any underlying services. Therefore they were expensed at
        the
        grant date. All warrants issued have cash-less exercise rights.
 
 The
        fair
        value of these warrants was estimated during the six months ended June 30,
        2005
        using the Black-Scholes option-pricing model with the following weighted-average
        assumptions: a dividend yield of 0%; expected volatility of 427%; risk-free
        interest rates of 3.6 to 4.05%; and expected life of 5 years. The Black-Scholes
        option valuation model was developed for use in estimating the fair value
        of
        traded options, which have no vesting restrictions and are fully transferable.
        In addition, option valuation models require the input of highly subjective
        assumptions including the expected stock price volatility. Because the Company's
        employee stock options have characteristics significantly different from
        those
        of traded options, and because changes in the subjective input assumptions
        can
        materially affect the fair value estimate, in management's opinion, the existing
        models do not necessarily provide a reliable single measure of the fair value
        of
        its stock options. The weighted-average fair value of options and warrants
        granted during the six months ended June 30, 2005 was $0.10.
 
 The
        following summarizes stock options and warrants outstanding, all of which
        are
        exercisable, at June 30, 2005:
 
 Weighted
                        averageOptions
                        and
                    
                    remaining
                        contractual
                    
                    Weighted
                        averagewarrants
                    
                    life
                        in years
                    
                    exercise
                        priceStock
                        options
                    
                    
                    12,121
                    
                    
                    2.3
                    
                    $
                    29.70Warrants
                    
                    
                    9,307,370
                    
                    
                    4.7
                    
                    
                    0.069,319,491
   Options
                        and
                    
                    Weighted
                        averagewarrants
                    
                    exercise
                        priceOutstanding
                        at December 31, 2004
                    
                    
                    12,121
                    
                    $
                    29.70Granted
                    
                    
                    
                    
                    
                    9,307,3700.06Outstanding
                        at June 30, 2005
                    
                    
                    9,319,491
                    
                    $
                    0.10
 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 June 30, 2005,
        a
        balance of $147,973 was due.
 
 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. In June 2005,
        $25,000
        was repaid.
 
 11
 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. In June 2005,
        $20,500
        was repaid.
 
 During
        the three months ended March 31, 2005 and June 30, 2005, the Company issued
        5,000,000 and 3,500,000 shares of its common stock to a shareholder, who
        has a
        greater than 10% ownership interest, for prepaid legal services, which were
        recorded as deferred stock-based consulting at their estimated fair value
        of
        $845,000 and $305,000, respectively to be recognized as discussed in Note
        4. At
        June 30, 2005, amounts due this shareholder of $460,706 are included in accounts
        payable - related party.
  Note
        6.Subsequent
        Events
 
 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 a per share
        price
        of $0.028. 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.
 
 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 a per share
        price
        of $0.035. The beneficial conversion feature on the conversion price being
        less
        than the $0.09 market price was recorded at $30,000, 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
        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 provided
        and to be provided. At June 30, 2005, the recorded balance of notes payable
        to
        Cornell was approximately $206,000 in principal and $56,000 in accrued interest.
        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 during the
        three
        months ended March 31, 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 expects to
        record a gain on forgiveness of debt of approximately $300,000 during the
        three
        months ending September 30, 2005, which includes a decrease in additional
        paid-in capital of approximately $130,000, the fair value of shares
        cancelled.
  Financing
        Commitment - On August 12, 2005, the Company announced that The Elevation
        Fund,
        LLC has committed to ITec and deposited funds sufficient to enable the Company
        to begin construction on and ordering equipment for its Environmental System
        Plant, and to begin drawing on the $2,000,000 “matching funds” loan from the
        California Integrated Waste Management Board Recyling Market Development
        Zone
        Loan program. The Company expects to break escrow on
        The
        Elevation Fund loan within the next week and complete initial construction
        of
        its first Eco2 Environmental System Plant within the next 60 days.
   ITec
        recently began ordering equipment towards completing production of the Eco2
        Environmental System Plant. The CIWMB has informed Itec that CIWMB is prepared
        to distribute from escrow the initial disbursement of the $2,000,000 loan
        upon
        receipt and approval of equipment invoices, seventy-five percent (75%) of
        each
        invoice to be paid from CIWMB loan funds, with the remaining twenty-five
        percent
        (25%) coming from Itec's working capital, including The Elevation Fund
        commitment.
  12
 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.
 
 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.




13


**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
        FM&T.  This new environmental technology, the System, 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.
 
 We
        had
        revenue of $0 for the three and six months ended June 30, 2005, compared
        with $0
        and $1,750 for the three and six month periods ended June 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 six month periods ended June 30, 2005,
        were
        $2,017,438 and $3,117,676, representing increases of $1,589,852 and $2,414,230,
        from the comparable periods in 2004. Increases in 2004 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 $1,503,000 and $2,265,000 during
        the three and six month periods ended June 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 cash remuneration.
  The
        Company recorded net interest expense of $101,338 and $116,390 for the three
        and
        six month periods ended June 30, 2005, respectively, as compared to $137,136
        and
        $202,240 for the three and six month periods ended June 30, 2004. Decreases
        are
        primarily attributed to the reduction of debt through the conversion of debt
        to
        equity, which was accomplished in the 4 th quarter
        of fiscal year 2004.
 
 Net
        loss
        increased for the three and six month periods ended June 30, 2005 to $2,274,916
        and $3,390,979, compared with $532,371 and $872,385 for the three and six
        month
        periods ended June 30, 2004, respectively, is due primarily to increased
        consulting and professional fees and other operating expenses as described
        above.
 
 At
        June
        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.
  Liquidity
        and Capital Resources
 
 Historically,
        our working capital needs have been satisfied primarily through private
        placements of our securities and other debt instruments, such as short and
        long-term notes with certain investors.  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
        June
        30, 2005, we had a working capital deficit of $2,379,556, compared to a working
        capital deficit of $1,627,957 at December 31, 2004.  The increase
        is
        primarily attributed to increases in accounts payable and accrued liabilities,
        including officer’s salaries.
 
 14
  As
        of
        June 30, 2005, we had total assets of $2,403,759 and a total shareholders’
        deficit of $2,554,262, compared with total assets of $423,149 and total
        stockholder's deficit of $1,906,260 at December 31, 2004. Total assets increased
        due to the receipt of the $2,000,000 equipment acquisition/matching funds
        loan
        from the California Waste Management Board (CIWMB). Those funds are being
        held
        in an escrow account for release upon presentation of equipment purchase
        invoices.
  For
        the
        six months ended June 30, 2005, cash used by operating activities increased
        to
        $242,677, which was financed through borrowings. For the six months ended
        June
        30, 2004, cash used by operating activities was $500,125, which was also
        financed through borrowings. For the six months ended June 30, 2005, we received
        $306,000 in proceeds from new notes payable.  For the comparable period
        in
        2004, we had an increase in notes payable of $500,000.
 
 During
        the six months ended June 30, 2005, the Company issued an additional 8,500,000
        shares to its attorney, who is a greater than 10% shareholder, having a market
        value of approximately $1,150,000. The purpose of the issuances of the shares
        was to pay for current and future fees for strategic business consulting
        and
        legal services rendered and to be rendered 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.
 
 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.
 
 We
        do not
        have sufficient cash or other financing available for the next twelve (12)
        months but we are in the process of raising funds. We expect to have sufficient
        cash or other financing available to satisfy our needs for the twelve (12)
        months ending June 30, 2006. There is no guarantee, however, that efforts
        will
        result in ITec raising sufficient capital or any capital or additional
        financing.
 
 Our
        plan
        for the next twelve (12) months is opening a plastic recycling plant in
        Stanislaus County, California. We have signed a five (5) year lease on a
        building and have moved all equipment necessary for the plastic recycling
        pilot
        plant to our new plant in Riverbank, California. The recycling pilot plant
        opened for operations in June 2003 and was located in Oakdale,
        California.
 
 The
        rent
        default on the lease for the plant in Riverbank, California, has been
        restructured and payments under the new agreement are current. This lease
        is for
        a 58,000 square foot, steel frame building in a heavy industrial complex
        and
        includes an additional 3500 square feet of office space. All infrastructures,
        including rail-sidings are in place. Installation of equipment will take
        approximately three (3) months with the first testing of Systems in November
        2005. After completing the testing of the System, the start-up operational
        phase
        will take an additional two (2) months. Employment would ramp up with the
        new
        recycling plant, starting with four (4) new employees, and then adding an
        additional forty-four (44) employees.
 
 ITec
        recently entered into a three (3) year agency agreement with H. Muelstein
&
        Co., Inc., pursuant to which H. Muelstein will act as ITec’s exclusive agent for
        the purchase and sale annually of up to 60 million pounds of ITec’s PET flake
        and post-consumer HDPE natural flake/pellets in the United States and
        Canada.
 
 Strategic
        Alliance Agreements
 
 ITec
        continues to engage in discussions for the purpose of entering into
        manufacturing, technology and sales alliances.  Such discussions are
        ongoing.
 
 While
        the
        Company has not signed any definitive agreements, the Company is also actively
        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.
 
 15
  Significant
        Accounting Policies and Estimates
 
 Management's
        Discussion and Analysis of Financial Condition and Results of Operations
        discusses the Company's consolidated financial statements, which have been
        prepared in accordance with accounting principles generally accepted in the
        United States of America.  The preparation of these financial statements
        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,
        including those related to reserves and intangible assets.  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 most significant accounting estimates inherent in
        the
        preparation of the Company's financial statements include estimates as to
        the
        appropriate carrying value of certain assets and liabilities which are not
        readily apparent from other sources, primarily the recovery of intangible
        assets.  These accounting policies are described at relevant sections
        in
        this discussion and analysis and in the notes to the consolidated financial
        statements included in our Annual Report on Form l0-KSB for the fiscal year
        ended December 31, 2004.
 
 Equity
 
 In
        the
        first six months of 2005, the Company issued approximately 16,686,000 shares
        of
        common stock for consulting and legal services rendered and to be rendered.
        These issuances continue to reflect our efforts to obtain necessary services
        that we need at a time when cash resources are limited for these services.
        We
        are optimistic that our recent agreements signed with Brean, Murray &
        Company, Inc., an investment banking firm in New York will assist us to obtain
        needed capital.
 
 Also
        during the first six months, the Company issued approximately 4,500,000 warrants
        to purchase Company common stock for $0.06 per share, to Gary De Laurentiis,
        our
        CEO, and 250,000 warrants to Frederick W Smith, our CFO, in recognition of
        their
        continuing efforts on behalf the Company. We recognized compensation expense
        of
        approximately $468,000 related to these grants. We also issued additional
        warrants exercisable for approximately 4,600,000 shares of common stock to
        directors of the Company and consultants. ****


16




**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 June 30, 2005 that have materially affected, or are reasonably
      likely to materially affect, our internal control over financial
      reporting.












17




**PART
      II - OTHER INFORMATION**




**Item
      1.**  **Legal
      Proceedings**





None





**Item
      2.**  **Unregistered
      Sales of Equity Securities and Use of Proceeds**





None





**Item
      3.**  **Defaults
      Upon Senior Securities**





None





**Item
      4.**  **Submission
      of matters to a Vote of Securities Holders**





None





**Item
      5.**  **Other
      Information**





None





**Item
      6.**  **Exhibits**





Exhibit
                No.
            Description3.1(i)
            Amendment
                to Restated Certificate of Incorporation3.2(i)
            Restated
                Certificate of Incorporation3.3(i)
            Certificate
                of Incorporation3.4(ii)
            Bylaws10.1
            Business
                Loan Agreement with the California Integrated Waste Management
                Board10.2
            Promissory
                Note with the California Integrated Waste Management
                Board10.3
            Commercial
                Security Agreement with the California Integrated Waste Management
                Board10.4
            Commercial
                Guarantee with the California Integrated Waste Management
                Board10.5
            Amendment
                No. 3 to Patent License Agreement with Honeywell31.1
            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





18





**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.**














August
      15, 2005       /s/
      Gary M. De
      Laurentiis


Gary M. De Laurentiis


Chairman & Chief Executive Officer














August
      15, 2005                 /s/
      Gary M. De
      Laurentiis


Gary M. De Laurentiis


Chairman & Chief Executive Officer


(Principal Executive Officer)














August
      15, 2005                 /s/
      Frederick Smith,
      Jr.


Frederick Smith, Jr.


Chief Financial Officer


(Principal Financial Officer)








19





EXHIBIT
      INDEX





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
            Business
                Loan Agreement with the California Integrated Waste Management Board
                Attached10.2
            Promissory
                Note with the California Integrated Waste Management Board
                Attached10.3
            Commercial
                Security Agreement with the California Integrated Waste Management
                Board
                Attached10.4
            Commercial
                Guarantee with the California Integrated Waste Management Board
                Attached10.5
            Amendment
                No. 3 to Patent License Agreement with Honeywell31.1
            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





20