SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

                 |X| QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1999
                                       or
                 |_| TRANSITION REPORT UNDER SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                           Commission file No. 0-12641


                                [GRAPHIC OMITTED]
                        IMAGING TECHNOLOGIES CORPORATION
             (Exact name of registrant as specified in its charter)



                  DELAWARE                           33-0021693
     (State or other  jurisdiction  of         (IRS Employer ID No.)
      incorporation or organization)

                             15175 INNOVATION DRIVE
                           SAN DIEGO, CALIFORNIA 92128
                    (Address of principal executive offices)

       Registrant's Telephone Number, Including Area Code: (858) 613-1300


Check 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 past 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 outstanding of the registrant's common stock as of February
16, 2000 was 90,714,988.


<PAGE>


<TABLE>
<CAPTION>
                                TABLE OF CONTENTS
                                                                                                                 Page
PART I - FINANCIAL INFORMATION

ITEM 1.  CONSOLIDATED FINANCIAL STATEMENTS
<S>                                                                                                                <C>
     Consolidated Balance Sheets - December 31, 1999 (unaudited) and June 30, 1999 (audited).....................   3
     Consolidated Statements of Operations  - 3 months ended December 31, 1999 and 1998 (unaudited)..............   4
     Consolidated Statements of Operations  - 6 months ended December 31, 1999 and 1998 (unaudited)..............   5
     Consolidated Statements of Cash Flows - 6 months ended December 31, 1999 and 1998 (unaudited)...............   6
     Notes to Consolidated Financial Statements..................................................................   7

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS ..................................................................................   8

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK..............................................  16


PART II - OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS.......................................................................................  17

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS...............................................................  17

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.........................................................................  17

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.....................................................  17

ITEM 5.  OTHER INFORMATION.......................................................................................  17

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K........................................................................  18

SIGNATURES                                                                                                         19
</TABLE>


                                       2


<PAGE>


PART I. - FINANCIAL INFORMATION

ITEM 1.   CONSOLIDATED FINANCIAL STATEMENTS

                IMAGING TECHNOLOGIES CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                        (IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>


                                                      ASSETS
                                                                             DECEMBER 31,         JUNE 30,
                                                                                    1999             1999
        Current assets
<S>                                                                         <C>                 <C>
             Cash                                                          $         116    $         75
             Accounts receivable                                                     268            1,959
             Inventories                                                              57              552
             Prepaid expenses and other                                                -              577
                                                                         ---------------   --------------
                  Total current assets                                               441            3,163

        Property and equipment, net                                                  752              986
        Capitalized software, net                                                  2,497            2,851
        Other                                                                        204              250
                                                                         ---------------   --------------

                                                                           $       3,894    $       7,250
                                                                         ===============   ==============

                                      LIABILITIES AND SHAREHOLDERS' EQUITY
        Current liabilities
             Borrowings under bank note payable                            $       7,253    $       6,469
             Short-term debt                                                       2,962            5,010
             Current portion of long-term debt                                         -                -
             Accounts payable                                                      4,153            5,532
             Accrued expenses                                                      3,065            2,671
                                                                         ---------------   --------------
                  Total current liabilities                                       17,433           19,682

        Long-term debt, less current portion                                           -                -
                                                                         ---------------   --------------
                  Total liabilities                                               17,433           19,682
                                                                         ---------------   --------------

        Commitments and contingencies (Note 11)

        Stockholders' equity (deficit)
             Series A preferred stock, $1,000 par value, 7,500 shares
                authorized, 420.5 shares issued and outstanding                      420              420
             Series D preferred stock, $2,000 stated value, 1,200
                shares authorized, no shares issued and outstanding                    -            1,800
             Series E preferred stock, $5,000 stated value, 1,250
                shares authorized, no shares issued and outstanding                    -            4,655
             Common stock, $0.005 par value, 100,000,000 shares
                Authorized, 90,714,988 shares issued and outstanding                 435              110
             Paid-in capital                                                      51,814           39,804
             Shareholder loans                                                      (105)            (105)
             Accumulated deficit                                                 (66,103)         (59,116)
                                                                         ---------------   --------------
                  Total shareholders' equity (deficit)                           (13,539)         (12,432)
                                                                         ---------------   --------------
                                                                           $       3,894    $       7,250
                                                                         ===============   ==============
</TABLE>

                 See Notes to Consolidated Financial Statements.


                                       3


<PAGE>


                IMAGING TECHNOLOGIES CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                  THREE MONTHS ENDED DECEMBER 31, 1999 AND 1998
                        (IN THOUSANDS, EXCEPT SHARE DATA)
                                   (UNAUDITED)
<TABLE>
<CAPTION>

                                                                              1999             1998
    Revenues
    <S>                                                             <C>              <C>
         Sales of products                                           $          61    $       4,195
         Engineering fees                                                        -                -
         Licenses and royalties                                                248                -
                                                                     -------------    -------------
                                                                               309            4,195
                                                                     -------------    -------------
    Costs and expenses
         Cost of products sold                                                 904            3,309
         Selling, general, and administrative                                1,549            3,676
         Cost of engineering fees, research, and development                   979              230
                                                                     -------------    -------------
                                                                             3,432            7,215
                                                                     -------------    -------------
    Income (loss) from operations                                           (3,123)          (3,020)
                                                                     -------------    -------------

    Other income (expense):
         Interest, net                                                        (103)            (335)
         Restructuring, ITEC Europe                                            (18)               -
         Other                                                                  82                -
                                                                     -------------    -------------
                                                                               (39)          (3,355)
                                                                     -------------    -------------

    Income (loss) before income taxes                                       (3,162)          (3,355)
    Income tax expense                                                                          (10)

    Net income (loss)                                                $      (3,162)  $       (3,365)
                                                                     =============   ==============
    Earnings (loss) per common share
         Basic                                                       $        0.13)  $        (0.26)
                                                                     =============   ==============
         Diluted                                                     $       (0.13)  $        (0.26)
                                                                     =============   ==============

    Weighted average common shares                                          55,556           12,852
                                                                     =============   ==============
    Weighted average common shares - assuming dilution                      55,556           12,852
                                                                     =============   ==============

                 See Notes to Consolidated Financial Statements.

 =================================================================================================
</TABLE>


                                       4


<PAGE>

<TABLE>
<CAPTION>


                IMAGING TECHNOLOGIES CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                   SIX MONTHS ENDED DECEMBER 31, 1999 AND 1998
                        (IN THOUSANDS, EXCEPT SHARE DATA)
                                   (UNAUDITED)

                                                                                       1999             1998
             Revenues
            <S>                                                            <C>               <C>
                  Sales of products                                         $         1,001   $       10,916
                  Engineering fees                                                       25              395
                  Licenses and royalties                                                336              163
                                                                            ---------------   --------------
                                                                                      1,362           11,474
                                                                            ---------------   --------------
             Costs and expenses
                  Cost of products sold                                               1,597            7,356
                  Selling, general, and administrative                                4,927            7,316
                  Cost of engineering fees, research, and development                 1,628              815
                                                                            ---------------   --------------
                                                                                      8,152           15,487
                                                                            ---------------   --------------

             Income (loss) from operations                                           (6,790)          (4,013)
                                                                            ---------------   --------------

             Other income (expense):
                  Interest, net                                                        (241)            (543)
                  Restructuring, ITEC Europe                                            (18)               -
                  Other                                                                  62                -
                                                                            ---------------   --------------
                                                                                       (197)            (543)
                                                                            ---------------   --------------

             Income (loss) before income taxes                                       (6,987)          (4,556)
             Income tax expense                                                           -              (14)

             Net income (loss)                                               $       (6,987)  $       (4,570)
                                                                            ================  ===============

             Earnings (loss) per common share
                  Basic                                                      $        (0.13)  $        (0.36)
                                                                            ================  ===============
                  Diluted                                                    $        (0.13)  $        (0.36)
                                                                            ================  ===============

             Weighted average common shares                                          55,566           12,852
                                                                            ================  ===============
             Weighted average common shares - assuming dilution                      55,566           12,852
                                                                            ================  ===============


             =================================================================================================

</TABLE>


                                       5


<PAGE>


<TABLE>
<CAPTION>
                IMAGING TECHNOLOGIES CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                   SIX MONTHS ENDED DECEMBER 31, 1999 AND 1998
                        (IN THOUSANDS, EXCEPT SHARE DATA)
                                   (UNAUDITED)

                                                                                 1999             1998
                 Cash flows from operating activities
                <S>                                                      <C>              <C>
                    Net income (loss)                                       $  (6,987)        $ (4,570)
                    Adjustments to reconcile net income (loss) to                   -                -
                      net cash from operating activities                            -                -
                         Non-cash special charges
                         Depreciation and amortization                            234              310
                          Amortization of capitalized software                    354                -
                          Stock issued for services                                 -                -
                         Changes in operating assets and liabilities
                            Accounts receivable                                 1,691             (297)
                            Inventories                                           495            1,156
                            Prepaid expenses and other                            623              (65)
                            Accounts payable and accrued expenses                (985)             646
                            Deferred revenue                                        -                -
                                                                               ------           ------
                                Net cash from operating activities             (4,575)          (2,820)
                                                                               ------           ------

                 Cash flows from investing activities
                    Prepaid licenses                                                 -               -
                    Capitalized software                                             -          (1,912)
                    Capital expenditures                                             -             (71)
                    Other                                                            -               -
                                                                               -------          ------
                                Net cash from investing activities                   -          (1,983)
                                                                               -------          ------

                 Cash flows from financing activities
                    Net borrowings under bank lines of credit                     784              (62)
                    Net borrowings under short-term notes payable              (2,048)           2,642
                    Net proceeds from issuance of common stock                  5,880            1,250
                    Net proceeds from issuance of preferred stock                   -                -
                    Redemption of preferred stock                                   -           (2,228)
                    Issuance of long-term debt                                      -              675
                    Repayment of long-term debt                                     -             (294)
                                                                               ------           ------
                                Net cash from financing activities              4,616            1,983
                                                                               ------           ------
                 Net increase (decrease) in cash                                   41           (2,820)
                 Cash, beginning of period                                         75            3,023
                                                                               ------           ------
                 Cash, end of period                                        $     116         $    203
                                                                               ======           ======
</TABLE>


                 See Notes to Consolidated Financial Statements.

                                       6


<PAGE>


                IMAGING TECHNOLOGIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        (IN THOUSANDS, EXCEPT SHARE DATA)
                                   (UNAUDITED)

NOTE 1.  BASIS OF PRESENTATION

The  accompanying  unaudited  consolidated  condensed  financial  statements  of
Imaging Technologies Corporation and Subsidiaries (the "Company" or "ITEC") have
been prepared  pursuant to the rules of the Securities  and Exchange  Commission
(the  "SEC") for  quarterly  reports on Form 10-Q and do not  include all of the
information  and note  disclosures  required by  generally  accepted  accounting
principles.  These financial  statements and notes herein are unaudited,  but in
the opinion of  management,  include  all the  adjustments  (consisting  only of
normal recurring adjustments) necessary for a fair presentation of the Company's
financial  position,  results  of  operations,  and cash  flows for the  periods
presented.  These financial  statements  should be read in conjunction  with the
Company's  audited  financial  statements  and notes thereto for the years ended
June 30, 1999,  1998,  and 1997 included in the Company's  annual report on Form
10-K  filed  with  the  SEC.  Interim  operating  results  are  not  necessarily
indicative of operating  results for any future  interim  period or for the full
year.

NOTE 2.  GOING CONCERN CONSIDERATIONS

The  accompanying  financial  statements  have been  prepared  assuming that the
Company will  continue as a going  concern.  At December  31, 1999,  and for the
three months then ended,  the Company had a net loss,  negative working capital,
and a decline in net worth  which raise  substantial  doubt about its ability to
continue as a going concern.  The Company's losses have resulted  primarily from
an  inability  to achieve  product  sales and  contract  revenue  targets due to
insufficient working capital.  ITEC's ability to continue operations will depend
on positive  cash flow,  if any,  from future  operations  and on the  Company's
ability to raise additional funds through equity or debt financing.  The Company
has cut back and/or  discontinued some of its operations and, if it is unable to
raise or obtain  needed  funding,  the  Company  may be  forced  to  discontinue
operations  generally.  On August 20, 1999, at the request of Imperial Bank, the
primary lender to the Company,  the Court appointed an operational  receiver for
the Company.  On August 23, 1999, the  operational  receiver took control of the
day-to-day  operations of the Company.  To date, through further equity infusion
into the Company,  primarily in the form of the exercise of warrants to purchase
the common stock of the Company,  operations have continued.  Without additional
funding  sufficient  to satisfy  Imperial  Bank and the other  creditors  of the
Company,  as well as providing working capital for the Company,  there can be no
assurances that such operations can continue.  The Company continues to actively
work with entities  capable of providing such funding.  Management has continued
to  implement  its  restructuring   plan  including   reductions  of  personnel,
consolidation of facilities,  disposal of  subsidiaries,  and the elimination of
product  lines.  The financial  statements do not include any  adjustments  that
might result from the outcome of this uncertainty.

NOTE 3.  EARNINGS (LOSS) PER COMMON SHARE

Basic earnings  (loss) per common share ("Basic EPS")  excludes  dilution and is
computed by dividing net income  (loss)  available to common  shareholders  (the
"numerator") by the weighted  average number of common shares  outstanding  (the
"denominator")  during the  period.  Diluted  earnings  (loss) per common  share
("Diluted  EPS") is similar  to the  computation  of Basic EPS  except  that the
denominator is increased to include the number of additional  common shares that
would have been  outstanding  if the dilutive  potential  common shares had been
issued. In addition, in computing the dilutive effect of convertible securities,
the  numerator  is  adjusted  to add  back  the  after-tax  amount  of  interest
recognized in the period  associated with any convertible  debt. The computation
of Diluted EPS does not assume  exercise or conversion of securities  that would
have an antidilutive effect on net earnings (loss) per share. The following is a
reconciliation of Basic EPS to Diluted EPS:


                                EARNINGS (LOSS)       SHARES        PER-SHARE
                                  (NUMERATOR)      (DENOMINATOR)     AMOUNT
DECEMBER 31, 1999
   Net loss                     $     (6,987)
     Preferred dividends                (625)
                                    ---------
   Basic and diluted EPS        $     (7,612)         55,566     $    (0.13)
                                    ========       =========        ========

                                       7


<PAGE>


NOTE 4.  INVENTORIES
                                                  DECEMBER 31,       JUNE 30,
                                                      1999             1999
     Inventories
         Materials and supplies                   $        5         $      50
         Finished goods                                   52               502
                                                    --------           -------
                                                  $       57         $     552
                                                    ========           =======


NOTE 5.  BANK LINES OF CREDIT; LONG-TERM DEBT

The Company is in default under its credit  agreements  with Imperial  Bank. The
bank is demanding immediate payment of all outstanding loan balances,  including
the term loan which has been  reclassified  as a current  liability.  Borrowings
bear  interest  at the  bank's  prime  interest  rate plus 0.75% plus 5% penalty
default  interest  and are  collateralized  by  substantially  all assets of the
Company.

The Company is in default on its long-term debt  obligations  and,  accordingly,
all outstanding balances have been classified as current obligations.


ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

         The following  discussion  and analysis  should be read in  conjunction
with the consolidated financial statements and notes thereto appearing elsewhere
in this Quarterly Report on Form 10-Q. The discussion of the Company's  business
contained in this Quarterly Report on Form 10-Q may contain certain projections,
estimates and other  forward-looking  statements  that involve a number of risks
and uncertainties, including those discussed below at "Risks and Uncertainties."
While  this  outlook  represents  management's  current  judgment  on the future
direction  of the  business,  such risks and  uncertainties  could cause  actual
results to differ  materially from any future  performance  suggested below. The
Company  undertakes  no  obligation  to  release  publicly  the  results  of any
revisions to these forward-looking statements to reflect events or circumstances
arising after the date hereof.

OVERVIEW

         Imaging   Technologies   Corporation   develops,    manufactures,   and
distributes high-quality digital imaging solutions. The Company produces printer
and imaging products for use in graphics and publishing, digital photography and
other niche business and technical markets.  Beginning with a core technology in
the  design  and  development  of  controllers   for  non-impact   printers  and
multifunction  peripherals,  the Company has expanded  its product  offerings to
include  monochrome and color  printers,  external print servers,  digital image
storage devices, and software to improve the accuracy of color reproduction.

         The Company's  business  continues to be in a significant  transitional
phase and there are important short-term  operational and liquidity  challenges.
Accordingly,   quarter-to-quarter   financial  comparisons  may  be  of  limited
usefulness now and for the next several quarters due to these important  changes
in the Company's business.

         Historically,  a portion  of the  Company's  income  was  derived  from
non-recurring engineering fees and royalty income from a relatively small number
of original equipment  manufacturing  ("OEM")  customers.  Over the past several
years,  the  Company  has  experienced  shortfalls  in  income  as a  result  of
engineering  contracts  with OEM  manufacturers  for  products  that were  never
completed by the OEM, were never  introduced into the market and shipped or were
cancelled by the customer before ITEC completed the deliverables  portion of the
contract.  Failure  of these  OEMs to  achieve  significant  sales  of  products
incorporating the Company's technology and fluctuations in the timing and volume
of such sales had a materially adverse effect on the Company.

         The Company's  current strategy is to develop and commercialize its own
technology. The Company intends to continue to develop its target markets and to
pursue clearly defined commercial market  opportunities in


                                       8


<PAGE>


order to leverage its core technologies.

         To successfully execute its current strategy,  the Company will need to
improve its working capital  position.  The report of the Company's  independent
auditors  accompanying the Company's June 30, 1999 financial statements includes
an  explanatory  paragraph  indicating  there is a  substantial  doubt about the
Company's ability to continue as a going concern, due primarily to the decreases
in the Company's  working  capital and net worth.  At December 31, 1999, and for
the three  months then  ended,  the  Company  had a net loss,  negative  working
capital,  and a decline in net worth which continue to raise  substantial  doubt
about its ability to continue as a going concern.

         The Company needs to raise additional funds to operate its business and
has been actively pursuing solutions to its liquidity difficulties. There can be
no assurance,  however, that the Company will be able to complete any additional
debt or  equity  financing  on  favorable  terms  or at all,  or that  any  such
financings,  if  completed,  will be  adequate  to meet  the  Company's  capital
requirements.  Any additional equity or convertible debt financings could result
in substantial dilution to the Company's stockholders. If adequate funds are not
available,  the Company will be required to delay,  reduce or eliminate  some or
all of its  planned  activities.  The  Company's  inability  to fund its capital
requirements would have a material adverse effect on the Company. See "Liquidity
and Capital Resources" and "Risks and Uncertainties -- Future Capital Needs."

RESULTS OF OPERATIONS NET REVENUES

         Revenues were $309 thousand and $4.2 million for the three month period
ended  December  31, 1999 and 1998,  respectively.  Sales of  products  were $61
thousand and $4.2 million for the three month period ended December 31, 1999 and
1998,  respectively.  Revenues  were $1.4 million and $11.5  million for the six
month period ended December 31, 1999 and 1998,  respectively.  Sales of products
were $1 million and $1.9  million for the six month  period  ended  December 31,
1999 and 1998, respectively. The decrease in product sales from 1998 to 1999 was
due to an  overall  decrease  in the  sales  activities  of the  Company  due to
insufficient  inventories and working capital.  The Company's lack of sufficient
working  capital has had a negative  adverse effect on printer  product sales in
particular, and overall revenues in general.

         Licensing  fees and royalties were $248 thousand and zero for the three
month period ended  December 31, 1999 and 1998  respectively.  For the six month
period  ended  December  31,  1999 and 1998,  respectively,  licensing  fees and
royalties  were $336 thousand and $163  thousand.  Royalties and licensing  fees
vary from quarter to quarter and are  dependent on the sales of products sold by
OEM customers using ITEC technologies.  These revenues, however, are expected to
decline in the future due to the Company's  focus on product sales as opposed to
technology licensing activities.

         There  were no  engineering  fees for the  three  months  period  ended
December 31, 1999 and 1998, respectively, Engineering fees were $25 thousand and
$395  thousand  for the six  month  period  ended  December  31,  1999  and 1998
respectively.  The decrease in 1999 compared to 1998 was primarily the result of
the changing  strategic focus of the Company toward product sales rather than on
the development of products and technologies for third parties.

COST OF PRODUCTS SOLD

         Cost of  products  sold were $904  thousand  of  product  sales for the
period ended December 31, 1999, or 1480% of sales. The loss of $843 thousand was
primarily due to the liquidation sale of inventories substantially below cost as
mandated  by the  court-appointed  operational  receiver.  (See  Note 2.) In the
year-earlier period, cost of products sold were $3,309 or 80% of sales.

         For the six month period ended  December 31, 1999 cost of products sold
were $1.6 million, or 160% of sales. The loss of $596 thousand was primarily due
to the  liquidation  of  inventories  under  the  direction  of the  operational
receiver. In the year-earlier period, cost of products sold were $7.3 million or
67% of sales.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

         Selling, general and administrative expenses for the three month period
ended  December  31, 1999 and 1998,  respectively,  were $1.5 and $3.7  million.
Selling,  general and  administrative  expenses  for the six month


                                       9
<PAGE>

period  ended  December 31, 1999 and 1998,  respectively,  were $4.9 million and
$7.3  million.  Selling,  general and  administrative  expenses  have  consisted
primarily  of  salaries  and  commissions  of  sales  and  marketing  personnel,
operating  receiver  costs,  salaries  and related  costs for general  corporate
functions, including finance, accounting,  facilities and legal, advertising and
other  marketing  related  expenses,  and fees for  professional  services.  The
Company reduced its selling, general and administrative expenses $2.1 million or
57% for the three month  period  ended  December  31, 1999 from the year earlier
period.  Selling,  general  and  administrative  expenses  were  reduced by $2.4
million or 33% for the six month  period  ended  December 31, 1999 from the year
earlier period.  The reduction in selling,  general and  administrative has been
due primarily to a lack of operating  capital and the liquidation of inventories
by the court-appointed operational receiver (also see Note 2 to the Consolidated
Financial Statements).

COST OF ENGINEERING

         Engineering  costs,  including costs of research and development,  were
$979  thousand and $230  thousand for the quarters  ended  December 31, 1999 and
1998,  respectively.  For the six month period ended December 31, 1999 and 1998,
respectively,  engineering  costs were $1.6  million and $815  thousand.  In the
previous  fiscal  year,  the Company had been  phasing out its  engineering  and
licensing  activities;   and  engineering  costs  were  re-directed  toward  the
development of the Company's branded products, including printers and associated
digital imaging  products.  New products from these activities had been expected
to begin being shipped to customers during the current fiscal year; however, due
to the lack of working capital and the associated  restrictions on the Company's
sales and  marketing  activities,  there was an increased  focus on  engineering
during the first two quarters of fiscal 2000 in order to stimulate revenues from
license fees and royalties.

LIQUIDITY AND CAPITAL RESOURCES

         Historically, the Company has financed its operations primarily through
cash  generated from  operations,  debt  financing,  and from the sale of equity
securities.

         As a result of some of the Company's financing  activities,  during the
six month period ended December 31, 1999, there has been a significant  increase
in the number of issued and outstanding shares. The Company converted its Series
D and Series E Convertible Preferred Stock and issued additional common stock in
lieu of cash in order to  preserve  working  capital.  The Series D and Series E
Convertible  Preferred  Stock were  converted  into  approximately  52.4 million
shares of common stock, including the exercise of warrants associated with these
securities.  Approximately  14.9 million  shares of common stock were issued for
corporate expenses in lieu of cash.

         On August 20, 1999, at the request of Imperial Bank, the primary lender
to the Company,  the Court appointed an operational receiver for the Company. On
August 23,  1999,  the  operational  receiver  took  control  of the  day-to-day
operations of the Company.  To date,  through  further equity  infusion into the
Company,  primarily  in the form of the  exercise of  warrants  to purchase  the
common stock of the  Company,  operations  have  continued.  Without  additional
funding in the near future,  sufficient  to satisfy  Imperial Bank and the other
creditors of the Company,  as well as providing working capital for the Company,
the Company will cease to operate.  The Company  continues to actively work with
entities capable of providing such funding.

         As of December 31, 1999,  the Company had negative  working  capital of
approximately  $17  million,  an  increase  of  approximately  $500  thousand as
compared to June 30, 1999. The Company's  working capital  deficit  continues to
increase due to its operating losses, increased indebtedness,  and suspension of
its sales and marketing activities.

         Net cash used in operating  activities increased to $4.6 million during
the six month period  ended  December  31,  1999,  from $2.8 million  during the
year-earlier period, due primarily to an increase in the Company's net loss.

         Net cash used in investing  activities decreased to xero during the six
month period ended December 31, 1999, from $2.0 million during the  year-earlier
period.  The decrease was due  primarily to the absence of any prepaid  license,
capitalized software, or capital expenditures in the period.

         Net cash from financing activities increased to $4.6 million during the
six month  period  ended  December  31,  1999,  from  $2.0  million  during  the
year-earlier  period.  The  increase  was due to  primarily  to and  increase in


                                       10
<PAGE>

proceeds  from the issuance of common stock to $5.9 million from $1.3 million in
the year-earlier period.

         The Company has no material commitments for capital  expenditures.  The
Company's 5%  convertible  preferred  stock (which ranks prior to the  Company's
common stock), carries cumulative dividends,  when and as declared, at an annual
rate of $50.00 per share.  The aggregate  amount of such dividends in arrears at
December 31, 1999, was approximately $625 thousand.

         The  Company's  capital   requirements   depend  on  numerous  factors,
including market acceptance of the Company's products,  the scope and success of
the Company's product development  efforts, the resources the Company devotes to
marketing  and  selling  its  products,  and other  factors.  The  report of the
Company's   independent  auditors  accompanying  the  Company's  June  30,  1999
financial  statements  includes an explanatory  paragraph  indicating there is a
substantial  doubt about the Company's  ability to continue as a going  concern,
due primarily to the decreases in the Company's  working  capital and net worth.
(Also see Note 2 to the Consolidate Financial Statements.)

RISKS AND UNCERTAINTIES

FUTURE CAPITAL NEEDS

         There  can  be no  assurance  with  respect  to  the  Company's  future
profitability or revenue growth. Losses may occur on a quarterly or annual basis
for  a  number  of  reasons  outside  the  Company's  control.   See  "Potential
Fluctuation in Quarterly Performance." The growth of the Company's business will
require  the  commitment  of  substantial  capital  resources.  If funds are not
available from operations,  the Company will need additional  funds. The Company
may seek such additional funding through public and private financing, including
debt or equity  financing.  Adequate funds for these  purposes,  whether through
financial markets or from other sources, may not be available when needed or, if
available,  not on terms  acceptable  to the  Company.  Insufficient  funds  may
require the  Company to delay,  reduce or  eliminate  some or all of its planned
activities.

         ITEC's  ability to continue  operations  will  depend on positive  cash
flow,  if any,  from future  operations  and on the  Company's  ability to raise
additional funds through equity or debt financing. The Company could be required
to cut  back or stop  operations  if it is  unable  to raise  or  obtain  needed
funding.

         As of  December  31,  1999,  the  Company  had  accumulated  losses  of
approximately $65.8 million.  Management anticipates incurring additional losses
until the  Company can  successfully  market and  distribute  its  products  and
develop new  technologies  and  commercially  viable future  products.  If it is
unable to do so,  ITEC will  continue  to have  losses  and might not be able to
continue operations.

         The report of the Company's independent accountants on the consolidated
financial statements contains an explanatory  paragraph regarding ITEC's ability
to  continue  as an  ongoing  business.  The  independent  accountants  cited  a
significant decline in working capital and net worth that has raised substantial
doubt as to the Company's ability to continue as an ongoing business. The "going
concern"  qualification  may reduce the  Company's  ability to obtain  necessary
financing in the future to run its business.

APPOINTMENT OF OPERATIONAL RECEIVER

         On August 20, 1999, at the request of Imperial Bank, the primary lender
to the Company,  the Superior Court, San Diego appointed an operational receiver
for the Company.  On August 23, 1999, the  operational  receiver took control of
the  day-to-day  operations  of the Company.  To date,  through  further  equity
infusion into the Company,  primarily in the form of the exercise of warrants to
purchase the common stock of the Company,  operations  have  continued.  Without
additional  funding in the near future,  sufficient to satisfy Imperial Bank and
the other creditors of the Company, as well as providing working capital for the
Company,  the Company will cease to operate.  The Company  continues to actively
work with entities  capable of providing  such  funding.  If such funding is not
obtained, the Company will need to reduce, suspend, or cease operations.

FLUCTUATION OF QUARTERLY PERFORMANCE


                                       11
<PAGE>

         The Company's  quarterly  operating results tend to fluctuate depending
on a number of factors.  These include: (1) the timing of product  announcements
and  introductions  of  products  by  the  Company  and  its  competitors;   (2)
availability  and cost of  components;  (3) timing of shipments of the Company's
products;   (4)  product  mix;  (5)  market  acceptance  of  new  products;  (6)
seasonality; (7) currency fluctuations; (8) changes in prices by the Company and
its competitors;  and (9) price protection for selling price reductions  offered
to distributors and OEM customers.  Accordingly,  the timing of expenditures for
staffing  and  related  support  costs,  advertising,   trade  show  attendance,
promotion,  research  and  development  expenditures,  and,  changes  in general
economic conditions impact quarterly performance. Any one of these factors could
have a material adverse effect on the Company's results of operations.

         The Company may experience  significant quarterly fluctuations in total
revenues  as well as  operating  expenses  with  respect to future  new  product
introductions.  In addition, the Company's component purchases,  production, and
spending  levels are based upon  forecast  demand  for the  Company's  products.
Accordingly,  any inaccuracy in forecasting could adversely affect the Company's
financial condition and results of operations. Demand for the Company's products
could be  adversely  affected by a slowdown in the overall  demand for  computer
systems, printer products, or digitally printed images. The Company's failure to
complete  shipments during a quarter could have a material adverse effect on the
Company's  results of  operations  for that quarter.  Quarterly  results are not
necessarily indicative of future performance for any particular period.

COMPETITIVE INDUSTRY

         The markets for the Company's  products are highly competitive and tend
to change rapidly.  Some of the Company's  current and  prospective  competitors
have  significantly  greater financial,  technical,  manufacturing and marketing
resources  than the  Company.  The  Company's  ability to compete in its markets
depends on a number of factors  within and outside its  control,  including  the
success and timing of product  introductions by the Company and its competitors,
selling prices,  product performance,  product distribution,  marketing ability,
and  customer  support.  A key element of the  Company's  strategy is to provide
competitively  priced,  quality  products.  There can be no  assurance  that the
Company's  products will continue to be  competitively  priced.  The Company has
reduced  prices on certain of its products in the past and will likely  continue
to do so in the future. Price reductions, if not offset by similar reductions in
product costs,  will affect gross margins and may adversely affect the Company's
financial condition and results of operations.

         The success of the Company will depend on its ability to market current
products,  including digital printers and hardware and software products used in
digital imaging,  and to rapidly introduce and market additional  products.  The
Company  does not have  control  over the demand for digital  imaging  products,
including the  preferences of users and the capability of personal  computers to
run the Company's digital imaging software and hardware products and to use ITEC
printers.  There can be no assurance that the products introduced by the Company
will achieve  acceptance,  or that other digital imaging products companies will
not develop and market  products  which  render ITEC  products  obsolete or less
competitive. Failure to obtain significant customer satisfaction or market share
for ITEC  products  will  significantly  and  negatively  affect  the  Company's
revenues. Also see "Short Product Lives and Technological Change."

SHORT PRODUCT LIVES AND TECHNOLOGICAL CHANGE

         The markets for the  Company's  products are  characterized  by rapidly
evolving technology,  frequent new product introductions,  and significant price
competition.  Consequently,  short  product life cycles and  reductions  in unit
selling  prices  due to  competitive  pressures  over the life of a product  are
common.  The Company's  future success will depend on its ability to continue to
develop and manufacture competitive products and achieve cost reductions for its
existing products.

         In addition,  the Company  monitors  new  technology  developments  and
coordinates  with  suppliers,  distributors  and  dealers  to  enhance  existing
products  and  lower  costs.  Advances  in  technology  will  require  increased
investment to maintain the Company's  market position.  The Company's  financial
condition and results of operations  could be adversely  affected if the Company
is unable to develop  and  manufacture  new,  competitive  products  in a timely
manner.


                                       12
<PAGE>


DEVELOPING MARKETS AND APPLICATIONS

         The markets for the Company's products are relatively new and are still
developing.  The Company believes that there has been growing market  acceptance
for color  printers  and  related  technologies  and  supplies.  There can be no
assurance,  however, that such markets will continue to grow. Other technologies
are constantly  evolving and improving.  There can be no assurance that products
based on these other technologies will not have a material adverse effect on the
demand for the Company's products.

         The  success  of  ITEC  products  in the  marketplace  depends  on many
factors, including product performance,  price, ease of use, support of industry
standards,  and customer support and service. There can be no assurance that the
Company will be able to compete  successfully  given these factors.  Competitors
may  develop  products  comparable  or  superior to those of the Company and may
adapt more quickly than ITEC to new technologies,  evolving industry trends, and
customer  requirements.  Therefore,  the Company may have to spend more money to
effectively   compete  for  market   share,   including   funds  to  expand  its
infrastructure,  which is a capital- and time-intensive process. In addition, if
other companies aggressively compete against ITEC, the Company may have to spend
more  money  on  advertising,   promotion,  trade  shows,  product  development,
marketing and overhead expenses,  hiring and retaining personnel, and developing
new technologies. These higher expenses may have a negative effect on net income
and profits.

         The development of sophisticated  digital imaging products is a lengthy
and intensive process and is subject to unforeseen risks,  delays,  problems and
costs. Unanticipated technical or other problems may occur which would result in
delays in our  development  program.  If we fail to complete  development of new
products or enhance  existing  products,  we could suffer  complete  loss of the
funds  committed by us to those  products or  enhancements.  The losses could be
substantial.

DEPENDENCE UPON SUPPLIERS

         At present, many of the Company's products use technology licensed from
outside suppliers.  The Company relies heavily on Adobe for upgrades and support
of the  PostScript  language.  In the case of its  font  products,  the  Company
licenses such fonts from outside  suppliers,  including  Adobe, who also own the
intellectual  property  rights  to  such  fonts.  The  reliance  on  third-party
suppliers  involves risk,  including limited control over potential hardware and
software  incompatibilities  with  the  Company's  products.  There  can  be  no
assurance  that all of the  suppliers  of products  marketed by the Company will
continue to license their  products to the Company  indefinitely,  or that these
suppliers will not license to other companies simultaneously.

         The  Company  presently  out-sources  the  production  of  most  of its
manufactured  products  through one vendor  located in  California.  This vendor
assembles products, using components purchased by the Company from other sources
or from  its own  inventory.  If this  manufacturer  does  not  have  sufficient
capacity to meet projected market demand for ITEC products, production will stop
and  replacement  of the  manufacturer  could  take  several  months  and  cause
substantial disruption to Company operations.

         While most  components  are available  locally from  multiple  vendors,
certain components used in the Company's products are only available from single
sources.   Although  alternate   suppliers  are  available  for  many  of  these
components,  the process of qualifying replacement suppliers,  replacing tooling
or ordering and receiving  replacement some components could take several months
and cause substantial  disruption to the Company's  operations.  Any significant
increase in component prices or decrease in component  availability could have a
material adverse effect on the Company.

DEPENDENCE ON KEY PERSONNEL

         The success of the  Company is  dependent,  in part,  on its ability to
attract and retain qualified management and technical personnel. Competition for
such personnel is intense, and the inability to attract additional key employees
or the loss of one or more key  employees  could  adversely  affect the Company.
There can be no assurance that the Company will retain its key personnel.

COMPONENT AVAILABILITY AND COST; DEPENDENCE ON SINGLE SOURCES OF SUPPLY


                                       13
<PAGE>


         ITEC presently  out-sources the manufacturing and production of most of
its manufactured  products to InCirT  Technologies  ("InCirT").  InCirT utilizes
components  that it  purchases  from  other  sources  or from  its own  internal
inventory;  and  assembles  and  packages  ITEC  products.  The  terms of supply
contracts are negotiated separately in each instance.  The Company believes that
this vendor has  sufficient  capacity to meet  projected  market  demand for the
Company's  products or that alternate  production  sources are available without
undue disruption.  ITEC has not experienced any difficulty over the past several
years in engaging contractors or in purchasing  components.  InCirT will perform
multi-step quality control testing prior to shipping the Company's products into
the Company's distribution channels.

         In addition to buying  such items as printed  circuit  boards and other
components  from  outside  vendors,  ITEC  purchases  and/or  licenses  software
programs,   including  operating  systems  and  intellectual   property  modules
(pre-written  software code to execute a specifically  defined operation).  ITEC
purchases these products from vendors who have licenses to sell such software to
the Company from the  originators of such software,  and has, from time to time,
directly   licensed  system  software  that  is  either  embedded  or  otherwise
incorporated in certain ITEC products.

         While most  components  are available  locally from  multiple  vendors,
certain components used in the Company's products are only available from single
sources.  Although  alternate  suppliers are readily available for many of these
components,  for some selected components, the process of qualifying replacement
suppliers,  replacing tooling, or ordering and receiving replacement  components
could take several  months and cause  substantial  disruption  to the  Company's
operations.  Any  significant  increase  in  component  prices  or  decrease  in
component availability could have a material adverse effect on the Company.

POTENTIAL CHALLENGE TO PRODUCTS OR INTELLECTUAL PROPERTY RIGHTS

         The Company's software products,  hardware designs, and circuit layouts
are copyrighted.  However, copyright protection does not prevent other companies
from  emulating the features and benefits  provided by the  Company's  software,
hardware  designs  or the  integration  of the two.  The  Company  protects  its
software source code as trade secrets and makes its Company  proprietary  source
code  available to OEM customers only under limited  circumstances  and specific
security and confidentiality  constraints. In many product hardware designs, the
Company  develops  ASICs,  which  encapsulate  proprietary  technology  and  are
installed on the circuit board. This can serve to significantly  reduce the risk
of  duplication  by  competitors,  but in no way  ensures the  complete  lack of
potential  for a  competitor  to replicate a feature or the benefit in a similar
product.  The Company  currently holds no patents.  Because computer and printer
imaging technology is such a rapidly changing business environment,  the Company
believes the effectiveness of patents,  trade secrets,  and copyright protection
are less important in  influencing  long term success than the experience of the
Company's technical team, contractual  relationships,  and a continuous focus on
technical advancement.

         The Company has  obtained  U.S.  registration  for several of its trade
names or trademarks, including PCPI, NewGen, ColorBlind, LaserImage, ColorImage,
ImageScript,  ImageFont, and ImageNet. These trade names are used to distinguish
the  Company's  products  in  the  marketplace.  Pending  trademarks  for  which
registration  is  currently  being  sought  include  NewGen,  Xtinguisher,   and
DealSeekers.

         From  time-to-time,  certain  competitors  have asserted  patent rights
relevant to the Company's business. The Company expects that this will continue.
The Company carefully evaluates each assertion relating to its products.  If the
Company is not  successful in  establishing  that asserted  rights have not been
violated,  the Company  could be  prohibited  from  marketing  the products that
incorporate such technology.  The Company could also incur  substantial costs to
redesign its  products or to defend any legal action taken  against the Company.
If the  Company's  products  should be found to infringe  upon the  intellectual
property  rights  of  others,   the  Company  could  be  enjoined  from  further
infringement and be liable for any damages.  The Company relies on a combination
of  trade  secret,   copyright  and  trademark   protection  and  non-disclosure
agreements  to  protect  its  proprietary  rights.  There  can be no  assurance,
however,  that the  measures  adopted by the Company for the  protection  of its
intellectual  property  will be adequate to protect its  interests,  or that the
Company's  competitors  will not  independently  develop  technologies  that are
substantially equivalent or superior to the Company's technologies.

DEPENDENCE ON EXPORT SALES


                                       14
<PAGE>

         The Company  intends to pursue  international  markets for growth.  The
Company  expects  export  sales to continue to represent a portion of its sales.
International  sales and  operations are subject to risks such as the imposition
of  governmental  controls,  export license  requirements,  restrictions  on the
export  of  critical  technology,  currency  exchange  fluctuations,   political
instability,  trade restrictions,  changes in tariffs,  difficulties in staffing
and managing international  operations,  and collecting accounts receivable.  In
addition,  the laws of certain  countries do not protect the Company's  products
and intellectual property rights to the same extent as do the laws of the United
States. As the Company continues to expand its international business, there can
be no  assurance  that  these  factors  will not have an  adverse  effect on the
Company.

RELIANCE UPON INDIRECT, INDEPENDENT DISTRIBUTION CHANNELS

         ITEC products are marketed and sold through  established  relationships
with OEM's, distributors, value-added resellers, manufacturers' representatives,
retail vendors,  and systems  integrators.  The Company has a network of dealers
and distributors in the United States,  Canada,  and Europe.  Additionally,  the
Company  has a number of  resellers  in Africa,  Asia,  the Middle  East,  Latin
America,  and Australia,  which we support  through  centralized  manufacturing,
distribution  and repair  operations  in San Diego and London.  The sales of the
Company's  products  are  principally  made through  distributors  who may carry
competing product lines. These distributors could reduce or discontinue sales of
ITEC  products,  and they may not  devote  the  resources  necessary  to provide
effective  sales and marketing  support,  which could  materially  and adversely
affect the  Company's  sales.  The Company  believes  that its future growth and
success will continue to depend in large part upon its distribution channels.

         The Company is dependent  upon the  continued  viability  and financial
stability  of its  distributors,  many of which  are  small  organizations  with
limited capital who are substantially  dependent on general economic  conditions
and specific factors affecting digital imaging markets. ITEC's business could be
materially  adversely  affected if its  distributors  fail to pay amounts to the
Company  that  exceed  reserves  that  have  been  established.  To  expand  its
distribution channels, the Company has entered into select OEM arrangements that
allow it to address  specific market  segments or geographic  areas. In order to
prevent inventory write-downs,  to the extent that OEM customers do not purchase
products as  anticipated  the Company may need to convert such  products to make
them salable to other customers.

VOLATILITY OF STOCK PRICE

         The  market  price  of the  Company's  Common  Stock  has  historically
fluctuated  significantly.  The Company  believes that a number of factors could
cause further  significant  fluctuations  in the price of the  Company's  Common
Stock. These factors include: (1) general stock market trends; (2) announcements
of  developments  related to the Company's  business;  (3)  fluctuations  in the
Company's  operating results;  (4) general conditions in the computer peripheral
market and the markets served by the Company or in the worldwide economy;  (5) a
shortfall in revenue or earnings from  securities  analysts'  expectations;  (6)
announcements  of  technological  innovations or new products or enhancements by
the  Company  or  its   competitors;   (7)  developments  in  patents  or  other
intellectual   property   rights;   and  (8)   developments   in  the  Company's
relationships with its customers and suppliers.

         In recent years, the stock market in general, and the market for shares
of technology stocks in particular, have experienced extreme price fluctuations,
which  have  often been  unrelated  to the  operating  performance  of  affected
companies.  There can be no  assurance  that the market  price of the  Company's
Common Stock will not experience significant  fluctuations that are unrelated to
the Company's operating performance.

DILUTION OF STOCKHOLDER INTERESTS

         The issuance of the Company's  reserved  shares would dilute the equity
interest of existing stockholders and could have a significant adverse effect on
the market price of ITEC common stock.

         The Company may seek  additional  financing,  which would result in the
issuance of  additional  shares of our capital  stock  and/or  rights to acquire
additional  shares of the  Company's  capital  stock.  Additional  issuances  of
capital  stock would result in a reduction of current  shareholders'  percentage
interest in the Company.


                                       15
<PAGE>

         The addition of a substantial number of shares of common stock into the
market  or by  the  registration  of  any  other  of our  securities  under  the
Securities Act may  significantly  and negatively  affect the prevailing  market
price for the  Company's  common stock.  Furthermore,  future sales of shares of
common stock issuable upon the exercise of outstanding  warrants and options may
have a  depressive  effect on the  market  price of the common  stock,  as these
warrants  and options  would be more likely to be  exercised  at a time when the
price of the common stock is in excess of the applicable exercise price.

         The sale or issuance of any shares of  preferred  stock  having  rights
superior  to those of the common  stock may result in a decrease in the value or
market price of the common stock. The issuance of preferred stock could have the
effect of  delaying,  deferring  or  preventing  a change of  ownership  without
further vote or action by the  stockholders  and may adversely affect the voting
and other rights of the holders of common stock.

         The Company's board of directors currently is authorized to issue up to
100,000  shares of preferred  stock.  The board has the power to  establish  the
dividend  rates,  preferential  payments  on  our  liquidation,  voting  rights,
redemption  and  conversion  terms and  privileges  for any series of  preferred
stock.

NASDAQ LISTING AND LIQUIDITY OF COMMON STOCK

         The  Company   currently   does  not  meet  the   listing   maintenance
requirements of the Nasdaq  SmallCap(TM) Market and Nasdaq rules, which include,
among other things, a minimum bid price for our common stock of $1.00. Since the
Company has not met all of these requirements, it is currently being reviewed by
Nasdaq.  If the Company were no longer in  compliance  with Nasdaq rules and was
unable to receive a waiver or to achieve compliance, and if the Company's common
stock were to be de-listed from the SmallCap  market,  shareholders  may find it
more difficult to sell their ITEC common stock.  This lack of liquidity also may
make it more difficult for the Company to raise capital in the future.

         In the event that ITEC  securities  are not listed on Nasdaq  SmallCap,
trading of the Company's common stock would likely be conducted over-the-counter
through the NASD  Electronic  Bulletin Board and covered by Rule 15g-9 under the
Securities  Exchange Act of 1934. Under this rule,  broker/dealers who recommend
these  securities to persons  other than  established  customers and  accredited
investors  must  make  a  special  written  suitability  determination  for  the
purchaser and receive the purchaser's  written  agreement to a transaction prior
to sale.  Securities  are exempt from this rule if the market  price is at least
$5.00 per share.

ABSENCE OF DIVIDENDS

         No cash dividends have been paid on the Company's  Common Stock to date
and the Company does not  anticipate  paying cash  dividends in the  foreseeable
future.


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.


                                       16
<PAGE>


PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         On or about February 2, 1999, American  Industries,  Inc., Ellison Carl
Morgan and entities related to Ellison Carl Morgan (the "Plaintiffs") served the
Company and certain  officers and  directors  of the Company (the  "Defendants")
with a lawsuit  filed in the Circuit Court of the State of Oregon for the County
of Multnomah,  alleging that the Defendants  violated certain Oregon  Securities
Laws in connection with the Plaintiffs' investments in the Company, breached the
contracts  with the  Plaintiffs  and  committed  fraud in  connection  with such
contracts.  In this action,  the plaintiffs are seeking  reimbursement for their
investments and lost profits in an amount to be determined at trial. On or about
February 22, 1999, the Plaintiffs  served  Defendants with an Amended  Complaint
seeking  approximately  $1.3  million for added  allegations  regarding  alleged
breaches of agreements between the Company and American Industries providing the
Company  with  letters  of  credit.  On or  about  September  1,  1999  American
Industries obtained a judgment on the issues in the case relating to the letters
of credit.  Trial on the remaining  securities law claims is currently scheduled
for April 2000. The Company  believes these claims are without merit and intends
to vigorously  defend against them on its own behalf as well as on behalf of the
other Defendants.

         On or about July 9, 1999,  Imperial Bank (the  "Plaintiff")  served the
Company and its various  operating  units with a lawsuit  filed in the  Superior
Court of the State of California for the County of San Diego, alleging breach of
credit  agreements  and  seeking   foreclosure  of  personal  property  security
interest,  appointment of a receiver,  and injunctive  relief. At the same time,
the  Plaintiff  filed a  motion  asking  the  Court  for the  appointment  of an
operational  receiver.  On August 20, 1999,  the Court  granted the  Plaintiff's
request and, on August 23, 1999, an operational  receiver assumed control of the
day-to-day operations of the Company (see discussion,  supra, under Management's
Discussion and  Analysis).  The Company has filed an answer to the complaint and
the case is progressing through normal procedures.

         On or about  October  7,  1999,  the law firms of Weiss &  Yourman  and
Stull,  Stull & Brody made a public  announcement  that they had filed a lawsuit
against  the Company and certain  current and past  officers  and/or  directors,
alleging  violation  of federal  securities  laws during the period of April 21,
1998 through October 9, 1998. On or about November 17, 1999, the lawsuit,  filed
in the name of Nahid Nazarian  Behfarin,  on her own behalf and others purported
to be similarly  situated,  was served on the  Company.  The Company has not yet
been  required to file an answer or other  pleading in response to the  lawsuit.
The Company  believes  these claims are without  merit and intends to vigorously
defend  against  them  on its own  behalf  as well  as on  behalf  of the  other
defendants.

         Throughout  fiscal 1999 and 2000,  and through the date of this filing,
various creditors of the Company have made claims and/or served the Company with
lawsuits alleging the failure of the Company to pay its obligations to them in a
total amount  exceeding $2.5 million.  The lawsuits are in various stages.  Some
have resulted in judgments being entered against the Company. Should the Company
be  required  to pay the  full  amount  demanded  in each of  these  claims  and
lawsuits,  such a  requirement  would  have a  material  adverse  impact  on the
operations  of the Company.  However,  the superior  security  interest  held by
Imperial Bank has prevented these creditors from collecting on their judgments.

         Furthermore,  from  time  to  time,  the  Company  may be  involved  in
litigation relating to claims arising out of its operations in the normal course
of business.

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

The Company is in default on its credit  agreement with Imperial Bank. At August
31, 1999,  the amount in default was $6.4  million.  At December  31, 1999,  the
amount  in  default  was  approximately  $6.2  million.  (Also  see  Note  2  to
Consolidated Financial Statements.)


                                       17
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ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

ITEM 5.  OTHER INFORMATION

 None

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits:  None

(b)  Reports on Form 8-K - No reports on Form 8-K were filed  during the quarter
ended December 31, 1999.


                                       18
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SIGNATURES

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
the  registrant  has duly  caused  this report to be signed on its behalf by the
undersigned thereunto duly authorized.

Dated: February 17, 2000

IMAGING TECHNOLOGIES CORPORATION (Registrant)

By: /s/  BRIAN BONAR
   -----------------
Brian Bonar
Chief Executive Officer
and Principal Financial and Accounting Officer

                                       19

<PAGE>

                                 EXHIBIT INDEX


27.1 ...................................................Financial Data Schedule