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, 2000

                                       or

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

                           Commission file No. 0-12641

                                   [ITEC LOGO]
                        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
1, 2001 was 132,635,582.


<PAGE>

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>

                                                                                                                 Page
PART I - FINANCIAL INFORMATION
<S>  <C>
ITEM 1.  CONSOLIDATED FINANCIAL STATEMENTS
     Consolidated Balance Sheets - December 31, 2000 (unaudited) and June 30, 2000 (audited)................        3
     Consolidated Statements of Operations  - 3 months ended December 31, 2000 and 1999 (unaudited).........        4
     Consolidated Statements of Operations  - 6 months ended December 31, 2000 and 1999 (unaudited).........        5
     Consolidated Statements of Cash Flows - 6 months ended December 31, 2000 and 1999 (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,
                                                                                    2000             2000
        Current assets
<S>                                                                             <C>              <C>
             Cash                                                               $    397         $    291
             Accounts receivable                                                     609              175
             Inventories                                                             158              203
             Prepaid expenses and other                                              370              333
                                                                              ----------       ----------
                  Total current assets                                             1,534            1,002

        Property and equipment, net                                                  706              531
        Goodwill                                                                     686                -
        Other                                                                          -              150
                                                                              ----------       ----------
                                                                           $       2,926    $       1,683
                                                                              ==========       ==========

                      LIABILITIES AND SHAREHOLDERS' EQUITY

        Current liabilities
             Borrowings under bank note payable                                $   4,865        $   5,765
             Short-term debt                                                       2,563            2,563
             Accounts payable                                                      6,887            5,378
             Accrued expenses                                                      1,581            1,828
                                                                              ----------       ----------
                  Total current liabilities                                       15,896           15,534

        Long-term debt                                                               850                -
                                                                              ----------       ----------

        Stockholders' equity (deficit)
             Series A preferred stock, $1,000 par value, 7,500 shares
                authorized, 420.5 shares issued and outstanding                      420              420
             Common stock, $0.005 par value, 200,000,000 shares
                Authorized, 118,513,745 shares issued and
                outstanding                                                          592              507
             Paid-in capital                                                      62,549           58,641
             Shareholder loans                                                      (105)            (105)
             Accumulated deficit                                                 (77,276)         (73,314)
                                                                              ----------       ----------
                  Total shareholders' equity (deficit)                           (13,820)         (13,851)
                                                                              ----------       ----------
                                                                           $       2,926    $       1,683
                                                                              ==========      ===========
</TABLE>

                 See Notes to Consolidated Financial Statements.

                                       3
<PAGE>


                IMAGING TECHNOLOGIES CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                  THREE MONTHS ENDED DECEMBER 31, 2000 AND 1999
                        (IN THOUSANDS, EXCEPT SHARE DATA)
                                   (UNAUDITED)
<TABLE>
<CAPTION>

                                                                                       2000             1999
             Revenues
<S>                                                                                <C>              <C>
                  Sales of products                                                $    556         $     61
                  Licenses and royalties                                                455              248
                                                                                ------------     ------------
                                                                                      1,011              309
                                                                                ------------     ------------
             Costs and expenses
                  Cost of products sold                                                 481              904
                  Selling, general, and administrative                                1,721            1,549
                  Cost of engineering fees, research, and development                   217              979
                                                                                ------------     ------------
                                                                                      2,419            3,432
                                                                                ------------     ------------

             Income (loss) from operations                                           (1,408)          (3,123)
                                                                                ------------     ------------

             Other income (expense):
                  Interest, net                                                        (177)            (103)
                  Restructuring                                                           -              (18)
                  Other                                                                   -               82
                                                                                ------------     ------------
                                                                                       (177)             (39)
                                                                                ------------     ------------

             Income (loss) before income taxes                                       (1,585)          (3,162)
             Income tax expense

             Net income (loss)                                                $      (1,585)   $      (3,162)
                                                                                ============     ============


             Earnings (loss) per common share
                  Basic                                                      $        (0.01)  $        (0.13)
                                                                                ============     ============
                  Diluted                                                    $        (0.01)  $        (0.13)
                                                                                ============     ============

             Weighted average common shares                                         112,709           55,556
                                                                                ============     ============
             Weighted average common shares - assuming dilution                     112,709           55,556
                                                                                ============     ============

                 See Notes to Consolidated Financial Statements.
</TABLE>

                                       4
<PAGE>


                IMAGING TECHNOLOGIES CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                   SIX MONTHS ENDED DECEMBER 31, 2000 AND 1999
                        (IN THOUSANDS, EXCEPT SHARE DATA)
                                   (UNAUDITED)
<TABLE>
<CAPTION>

                                                                                       2000             1999
             Revenues
<S>                                                                               <C>              <C>
                  Sales of products                                               $   1,216        $   1,001
                  Engineering fees                                                        -               25
                  Licenses and royalties                                                632              336
                                                                                 -----------      -----------
                                                                                      1,848            1,362
                                                                                 -----------      -----------
             Costs and expenses

                  Cost of products sold                                                 924            1,597
                  Selling, general, and administrative                                4,072            4,927
                  Cost of engineering fees, research, and development                   456            1,628
                                                                                 -----------      -----------
                                                                                      5,452            8,152
                                                                                 -----------      -----------

             Income (loss) from operations                                           (3,604)          (6,790)
                                                                                 -----------      -----------

             Other income (expense):
                  Interest, net                                                        (358)            (241)
                  Restructuring, ITEC Europe                                              -              (18)
                  Other                                                                                    62
                                                                                 -----------      -----------
                                                                                          -
                                                                                       (358)            (197)
                                                                                 -----------      -----------

             Income (loss) before income taxes                                       (3,962)          (6,987)
             Income tax expense

             Net income (loss)                                                $      (3,962)   $      (6,987)
                                                                                 ===========      ===========

             Earnings (loss) per common share
                  Basic                                                      $        (0.04)  $        (0.13)
                                                                                ============     ============
                  Diluted                                                    $        (0.04)  $        (0.13)
                                                                                ============     ============

             Weighted average common shares                                         107,997           55,566
                                                                                ============     ============
             Weighted average common shares - assuming dilution                     107,997           55,566
                                                                                ============     ============
</TABLE>

                 See Notes to Consolidated Financial Statements.

                                       5
<PAGE>


                IMAGING TECHNOLOGIES CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                   SIX MONTHS ENDED DECEMBER 31, 2000 AND 1999
                        (IN THOUSANDS, EXCEPT SHARE DATA)
                                   (UNAUDITED)
<TABLE>
<CAPTION>

                                                                                 2000             1999
                 Cash flows from operating activities
<S>                                                                       <C>              <C>
                    Net income (loss)                                     $    (3,962)     $    (6,987)
                    Adjustments to reconcile net income (loss) to net
                      cash from operating activities
                         Depreciation and amortization                            143              234
                          Amortization of capitalized software                      -              354
                          Stock issued for services                               618                -
                         Changes in operating assets and liabilities
                            Accounts receivable                                  (355)           1,691
                            Inventories                                            45              495
                            Prepaid expenses and other                            (37)             623
                            Accounts payable and accrued expenses                 767             (985)
                                                                             --------         --------
                                Net cash from operating activities             (2,781)          (4,575)

                 Cash flows from investing activities
                    Capital expenditures                                          (90)               -
                    Other                                                         150                -
                                                                             --------         --------
                                Net cash from investing activities                 60                -
                                                                             --------         --------
                 Cash flows from financing activities
                    Net borrowings under bank lines of credit                    (900)             784
                    Net borrowings under short-term notes payable                   -           (2,048)
                    Net borrowings under long-term notes payable                  850
                    Net proceeds from issuance of common stock                  2,877            5,880
                                                                             --------         --------
                                Net cash from financing activities              2,827            4,616
                                                                             --------         --------

                 Net increase (decrease) in cash                                  106               41
                 Cash, beginning of period                                        291               75
                                                                             --------         --------
                 Cash, end of period                                      $      397       $       116
                                                                             ========         ========
</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, 2000,  1999,  and 1998 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, 2000,  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  Company's  primary
lender,  the Superior Court of San Diego  appointed an operational  receiver who
took control of the Company's day-to-day  operations on August 23, 1999. On June
21, 2000, in connection with a settlement  agreement reached with Imperial Bank,
the  Superior  Court of San Diego  issued an order  dismissing  the  operational
receiver.  On October 21,  1999,  Nasdaq  notified the Company that it no longer
complied  with the bid price and net tangible  assets/market  capitalization/net
income  requirements for continued  listing on The Nasdaq SmallCap Market.  At a
hearing on December 2, 1999, a Nasdaq Listing  Qualifications  Panel also raised
public interest  concerns  relating to the Company's  financial  viability.  The
Company's  common stock was delisted from The Nasdaq Stock Market effective with
the close of business on March 1, 2000.  As a result of being  delisted from The
Nasdaq SmallCap  Market,  stockholders may find it more difficult to sell common
stock.  This lack of liquidity  also may make it more difficult to raise capital
in the future.  Trading of the  Company's  common  stock is now being  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.

The Securities and Exchange Commission adopted regulations that generally define
a "penny  stock" as any  equity  security  that has a market  price of less than
$5.00 per share.  Additionally,  if the equity  security  is not  registered  or
authorized  on a national  securities  exchange or the Nasdaq and the issuer has
net tangible assets under $2,000,000,  the equity security also would constitute
a "penny  stock." Our common  stock does  constitute  a penny stock  because our
common stock has a market  price less than $5.00 per share,  our common stock is
no longer quoted on Nasdaq and our net tangible assets do not exceed $2,000,000.
As  our  common  stock  falls  within  the  definition  of  penny  stock,  these
regulations require the delivery,  prior to any transaction involving our common
stock, of a disclosure  schedule explaining the penny stock market and the risks
associated  with it.  Furthermore,  the  ability of  broker/dealers  to sell our
common  stock and the ability of  shareholders  to sell our common  stock in the
secondary  market would be limited.  As a result,  the market  liquidity for our
common  stock  would be  severely  and  adversely  affected.  We can  provide no
assurance that trading in our common stock will not be subject to these or other
regulations  in the  future,  which would  negatively  affect the market for our
common stock.

The  Company  is in the  process  of  reestablishing  management  control of its
operations  and  resuming  its  strategic  plan.  In order to succeed,  however,
Company must obtain  additional  funds to provide  adequate  working capital and
finance  operations.  The Company has engaged a financial advisor to assist with
additional  fund raising  efforts and

                                       7
<PAGE>

to help identify merger and acquisition  candidates.  There can be no assurance,
however,  that  the  Company  will be able to  comply  with  the  Imperial  Bank
settlement  agreement,  meet the  conditions  under the financing  facility,  or
complete any additional debt or equity  financings 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  may be required to delay,
reduce  or  eliminate  some  or all of its  planned  activities,  including  any
potential mergers or acquisitions.  The Company's  inability to fund its capital
requirements would have a material adverse effect on the Company.  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 anti-dilutive effect on net earnings (loss) per share.

NOTE 4.  INVENTORIES

                                              DECEMBER 31,       JUNE 30,
                                                  2000             2000
     Inventories

         Materials and supplies             $         50     $          87
         Finished goods                              108               116
                                                 -------         ---------
                                             $       158      $        203
                                                 =======          ========

NOTE 5.  CONVERTIBLE NOTES PAYABLE

On December  12, 2000,  the Company  entered into a  Convertible  Note  Purchase
Agreement with Amro  International,  S.A., Balmore Funds, S.A. and Celeste Trust
Reg.  Pursuant to this agreement,  the registrant sold to each of the purchasers
convertible  promissory  notes in the  aggregate  principal  amount of  $850,000
bearing  interest at the rate of eight percent (8%) per annum,  due December 12,
2003, each convertible into shares of the  registrant's  common stock.  Interest
shall be payable,  at the option of the purchasers,  in cash or shares of common
stock.  At any time after the  issuance of the notes,  each note is  convertible
into such number of shares of common stock as is determined by dividing (a) that
portion  of the  outstanding  principal  balance  of the  note as of the date of
conversion by (b) the lesser of (x) an amount equal to seventy  percent (70%) of
the average  closing bid prices for the three (3) trading days prior to December
12, 2000 and (y) an amount equal to seventy percent (70%) of the average closing
bid prices for the three (3) trading  days having the lowest  closing bid prices
during the thirty (30) trading days prior to the conversion date.

Additionally,  the  registrant  issued a warrant  to each of the  purchasers  to
purchase  a number of shares of the  registrant's  common  stock at an  exercise
price  equal to $.0887 per share.  The  purchasers  may  exercise  the  warrants
through December 12, 2005.

                                       8
<PAGE>

NOTE 6.  BUSINESS ACQUISITION

Effective  December 1, 2000, the Company acquired all of the outstanding  shares
of  Eduadvantage.com  in exchange for 3,500,000 of the  Company's  common stock.
Eduadvantage.com  is a California  corporation  that is  primarily  engaged in a
web-based  business.  The  acquisition  has  been  accounted  for as a  purchase
transaction. The following summarized the net assets acquired:

     Assets
       Receivables                                                  $  79
       Equipment                                                        3
       Goodwill                                                       686
                                                                    -----
                                                                      768

     Less assumption of liabilities                                  (495)
                                                                    -----
     Net assets acquired                                             $273
                                                                     ====

During the quarter ended December 31, 2000, the Company also acquired the rights
to certain software in exchange for 1,200,000 shares of its common stock.

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 continue to focus on rebuilding
its OEM business and develop,  commercialize  and  distribute its own technology
products,  including its software  products.  The Company intends to continue to
develop  its target  markets and to pursue  clearly  defined  commercial  market
opportunities in order to leverage its core technologies.

         Additionally,   the  Company  has  been  pursuing   certain   strategic
acquisitions in order to grow its revenues and to pursue new  opportunities  for
revenues and profits.

         In December,  2000, the Company acquired all of the outstanding  shares
of  Eduadvantage.com  in exchange for shares of the Company's  common stock (See
Note 6 of the Notes to the Consolidated Financial Statements).  Eduadvantage.com
is primarily  engaged in an Internet  business  selling  educations  software to
institutions,

                                       9
<PAGE>

businesses,  and  end-users.  As part  of this  transaction,  the  Company  also
acquired the rights to certain proprietary  software.  This acquisition furthers
the Company's objective to develop and support e-commerce strategies, which also
includes  the  Company's  Dealseekers.com  unit,  which  the  Company  hopes  to
re-launch  later this year.  Eduadvantage  provides ITEC a vehicle to distribute
ITEC products,  along with  EduAdvantage.com's  current products for accounting,
desktop  publishing,  tax software,  and virus  detection.  The  acquisition  is
expected to provide ITEC with incremental revenues.

         In November, 2000, ITEC entered into an agreement to acquire a majority
interest in Quality  Photographic  Imaging  (formerly  known as Quick Pix, Inc.)
("QPI")  (OTC:  QPIX).  QPI was  established  in 1982  and is a  leading  visual
marketing support firm, located in Southern  California.  The company provides a
spectrum  of  services  to  produce  final  color  visuals,   both  digital  and
photographic.  QPI is a total visual marketing  support company servicing a wide
range of varied clientele.  The acquisition  requires QPI shareholder  approval,
which is pending.

         In December,  2000,  ITEC signed a definitive  agreement to purchase 75
percent of the stock of Pen  Interconnect,  Inc.  (OTC  Bulletin  Board:  PENC -
news),   Irvine,   Calif.   Two  ITEC  business  units,   EduAdvantage.com   and
Dealseekers.com,  will be combined  into Pen  Interconnect  to create a publicly
traded  e-commerce  company.  The agreement is  contingent  on Pen  Interconnect
resolving certain  judgments,  liens and vendor debts and obtaining  shareholder
approval, prior to the closing, which is anticipated in the next 60 days.

         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, 2000 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 30, 2000, 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.  To help
address these needs, on December 12, 2000, ITEC entered into a Convertible  Note
Purchase  Agreement  with several  investors  for  $850,000.  Additionally,  the
Company  issued a warrant  to each of the  purchasers  to  purchase  a number of
shares of the registrant's common stock at an exercise price equal to $.0887 per
share.

         The  Company  has also  engaged a  financial  advisor  to  assist  with
additional  fund raising  efforts and to help  identify  merger and  acquisition
candidates. There can be no assurance, however, that the Company will be able to
obtain 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 $1 million and $309  thousand for the three month period
ended December 31, 2000 and 1999,  respectively,  as increase of 227%.  Sales of
products  were $556  thousand  and $61 thousand for the three month period ended
December 31, 2000 and 1999,  respectively,  an increase of 811%.  Revenues  were
$1.8 million and $1.4  million for the six month period ended  December 31, 2000
and 1999, respectively,  an increase of 36%. Sales of products were $1.2 million
and $1  million  for the six month  period  ended  December  31,  2000 and 1999,
respectively,  and  increase  of 21%.  The  increase  in product  sales from the
reported  periods  of 1999 to 2000 was due to an overall  increase  in the sales
activities of the Company  since the  court-appointed  operational  receiver was
relieved in July,  2000.  However,  the  Company's  lack of  sufficient  working
capital has had, and may continue to have a negative  adverse  effect on printer
product sales in particular, and overall revenues in general.

         Licensing  fees and royalties  were $455 thousand and $248 thousand for
the three  month  period  ended  December  31,  2000 and 1999  respectively,  an
increase of 79%.  For the six month  period  ended  December  31, 2000 and 1999,
respectively, licensing fees and royalties were $632 thousand and $336 thousand,
respectively, an increase of 88%. 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 and the  operations of the
Company's e-commerce businesses as opposed to technology licensing activities.

                                       10
<PAGE>

COST OF PRODUCTS SOLD

         Cost of products  sold were $481  thousand  (87% of product  sales) and
$904 thousand  (1,481% of product  sales) for the period ended December 31, 2000
and 1999, respectively.  The increase in margins is primarily due to the absence
of the liquidation policies of the court-appointed operational receiver, who was
relieved in July,  1999. While the Company expects to improve its margins moving
forward, there remain certain challenges related to profitability of its printer
products,   for  which  the  Company  typically  outsources  its  manufacturing.
Management  hopes to increase  margins  through more efficient  outsourcing  for
parts and  manufacturing,  and improving  the Company's  product mix in favor of
higher margin software products.

         For the six month  period  ended  December  31, 2000 and 1999,  cost of
products  sold were $924 thousand  (76% of product  sales) and $1.6 million,  or
160% of product sales, respectively.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

         Selling, general and administrative expenses for the three month period
ended  December  31,  2000 and 1999,  respectively,  were $1.7  million and $1.5
million.  Selling,  general and administrative expenses for the six month period
ended  December  31,  2000 and  1999,  respectively,  were $4  million  and $4.9
million.  Selling,  general and administrative expenses have consisted primarily
of salaries  and  commissions  of sales and  marketing  personnel,  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.  For the three month period ended  December 31, the
selling, general, and administrative expenses have increased $172 thousand (11%)
due primarily to reserves for certain account receivable.  However,  for the six
month period ended December 31, 2000 and 1999, the Company has reduced  selling,
general,  and  administrative  expenses $855 thousand (17%) due primarily to the
elimination of costs associated with the court-appointed  operational  receiver,
who was relieved in July 2000.

COST OF ENGINEERING

         Engineering  costs,  including costs of research and development,  were
$217  thousand and $979  thousand for the quarters  ended  December 31, 2000 and
1999, respectively;  a decrease of $762 thousand (78%). For the six month period
ended  December  31, 2000 and 1999,  respectively,  engineering  costs were $456
thousand and $1.6  million;  a decrease of $1.1 million  (72%).  The Company had
been reducing its  engineering  and  licensing  activities  and has  re-directed
engineering  costs toward the development  and support of the Company's  branded
products, including printers and associated digital imaging products.

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,  there has
been a  significant  increase  in the number of issued and  outstanding  shares.
During the three months  period ended  December 31 2000,  the Company  issued an
additional  13 million  shares.  During the six month period ended  December 31,
2000, the Company issued an additional 17 million shares. These shares of common
stock  were  issued  for  raising  capital  due to  private  placements  and for
corporate expenses in lieu of cash.

         As of December 31, 2000,  the Company had negative  working  capital of
$14.4  million,  an  increase of  approximately  $100  thousand  (1%) in working
capital as compared to June 30, 1999.

         Net cash used in  operating  activities  decreased  39% to $2.8 million
during the six month period ended  December 31, 2000,  from $4.6 million  during
the  year-earlier  period,  due primarily to a 43% decrease in the Company's net
loss during the period.

         Net cash from  investing  activities  was $60  thousand  during the six
month  period  ended  December  31,  2000.  There  was no such  activity  in the
corresponding  six month  period  in the  prior  year.  The  difference  was due
primarily to prepaid expenses and capital expenditures in the period.

         Net cash from  financing  activities was $2.8 million for the six month
period ended  December 31, 2000, a decrease of $1.8 million or 39%. The decrease
is due  primarily  to a  reduction  in proceeds  from the sale of common  stock,
because the  trading  price of the  Company's  common  stock fell  substantially
during the period.

         The Company has no material commitments for capital  expenditures.  The
Company's 5%  convertible

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<PAGE>

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, 2000,
was approximately $646 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,  2000
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

NEED FOR FUTURE CAPITAL

         ITEC's  business has not been  profitable in the recent past and it may
not be profitable in the future.  The Company may incur losses on a quarterly or
annual  basis for a number of  reasons,  some  within  and  others  outside  its
control. See "Potential Fluctuation in Our 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.  ITEC 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.  Even if funds are  available,  the terms under which the
funds are available may not be acceptable to the Company. Insufficient funds may
require the delay,  reduction,  or  elimination  of some or all of the Company's
planned activities.  Also see "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources."

POTENTIAL FLUCTUATION IN QUARTERLY PERFORMANCE

         Quarterly operating results can fluctuate  significantly depending on a
number of factors,  any one of which could have a material adverse effect on the
Company's  results of  operations.  The factors  include:  the timing of product
announcements  and subsequent  introductions of new or enhanced  products by the
Company and by its competitors,  the  availability  and cost of components,  the
timing and mix of shipments of the Company's products,  the market acceptance of
new  products,  seasonality,  currency  fluctuations,  changes in the  Company's
prices and in the Company's  competitors'  prices,  price protection  offered to
distributors and OEMs for product price  reductions,  the timing of expenditures
for staffing and related  support costs,  the extent and success of advertising,
research  and  development   expenditures,   and  changes  in  general  economic
conditions.

         The  Company  may  experience  significant  quarterly  fluctuations  in
revenues and  operating  expenses as it introduces  new  products.  In addition,
component purchases,  production and spending levels are based upon management's
forecast  of  future  demand  for  the  Company's  products.   Accordingly,  any
inaccuracy  in the  Company's  forecasts  could  adversely  affect its 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 its results
of operations for that quarter. Quarterly results are not necessarily indicative
of future performance for any particular period.

HIGHLY COMPETITIVE INDUSTRY

         The  markets  for ITEC  products  are highly  competitive  and  rapidly
changing.  Some  of the  Company's  current  and  prospective  competitors  have
significantly   greater  financial,   technical,   manufacturing  and  marketing
resources than ITEC. The Company's  ability to compete in its markets depends on
a number of factors,  some within and others outside its control.  These factors
include:  the frequency and success of product  introductions by the Company and
by its competitors,  the selling prices of ITEC products and of its competitors'
products,  the  performance of ITEC products and of its  competitors'  products,
product  distribution by ITEC and by its competitors,  ITEC's marketing  ability
and the  marketing  ability of its  competitors,  and the  quality  of  customer
support offered by ITEC and by its competitors.

         A key element of ITEC's  strategy is to provide  competitively  priced,
quality products.  The Company cannot be certain that its products will continue
to be competitively  priced.  The Company has reduced prices on certain 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 reduce gross margins
and may  adversely  affect the  Company's  financial  condition  and  results of
operations.

                                       12
<PAGE>

SHORT PRODUCT LIVES AND TECHNOLOGICAL CHANGE

         The markets for ITEC's products are  characterized  by rapidly evolving
technology,   frequent  new  product   introductions   and   significant   price
competition.  Consequently,  short product life cycles and reductions in product
selling  prices  due to  competitive  pressures  over the life of a product  are
common. The future success of the Company will depend on its ability to continue
to develop and manufacture  competitive products and achieve cost reductions for
existing products. In addition, the Company monitors new technology developments
and coordinates with suppliers, distributors and dealers to enhance its existing
products  and to lower costs.  Advances in  technology  will  require  increased
investment in product development to maintain the Company's market position.  If
the Company is unable to develop and manufacture new,  competitive products in a
timely  manner,  its  financial  condition  and  results of  operations  will be
adversely affected.

DEVELOPING MARKETS AND APPLICATIONS

         The  markets  for  ITEC  products  are  relatively  new and  are  still
developing.  Management  believes that there has been growing market  acceptance
for color printers,  color management software and supplies.  The Company cannot
be  certain,   however,   that  these  markets  will  continue  to  grow.  Other
technologies  are  constantly  evolving  and  improving.  The Company  cannot be
certain that products based on these other technologies will not have a material
adverse effect on the demand for its products.

DEPENDENCE UPON SUPPLIERS

         At  present,  many of ITEC's  products  use  technology  licensed  from
outside  suppliers.  The Company relies heavily on these  suppliers for upgrades
and support.  In the case of ITEC font products,  the Company licenses the fonts
from outside  suppliers,  who also own the  intellectual  property rights to the
fonts.  The Company's  reliance on  third-party  suppliers  involves many risks,
including limited control over potential hardware and software incompatibilities
with ITEC products.  Furthermore,  the Company cannot be certain that all of the
suppliers  of products it markets  will  continue to license  their  products to
ITEC, or that these suppliers will not license their products to other companies
simultaneously.

RISKS RELATED TO ACQUISITIONS

         In order to grow the business,  the Company may acquire businesses that
management believes are complementary.  To successfully implement this strategy,
the  Company  must  identify  suitable  acquisition  candidates,  acquire  these
candidates  on acceptable  terms,  integrate  their  operations  and  technology
successfully  with the  Company,  retain  existing  customers  and  maintain the
goodwill  of the  acquired  business.  The  Company  may fail in its  efforts to
implement  one or  more  of  these  tasks.  Moreover,  in  pursuing  acquisition
opportunities,  the  Company  may compete  for  acquisition  targets  with other
companies  with similar  growth  strategies.  Some of these  competitors  may be
larger and have greater financial and other resources than those of the Company.
Competition for these acquisition  targets likely could also result in increased
prices of acquisition  targets and a diminished pool of companies  available for
acquisition.  Overall  financial  performance  will be materially  and adversely
affected if the Company is unable to manage internal or acquisition-based growth
effectively.

         Acquisitions involve a number of risks, including: integrating acquired
products  and  technologies  in a  timely  manner;  integrating  businesses  and
employees  with  the  Company's  business;   managing   geographically-dispersed
operations;   reductions  in  the  Company's  reported  operating  results  from
acquisition-related charges and amortization of goodwill; potential increases in
stock  compensation  expense and increased  compensation  expense resulting from
newly-hired employees;  the diversion of management attention; the assumption of
unknown liabilities; potential disputes with the sellers of one or more acquired
entities;  the  Company's  inability  to  maintain  customers  or goodwill of an
acquired  business;  the need to divest  unwanted  assets or  products;  and the
possible failure to retain key acquired personnel.

         Client  satisfaction or performance  problems with an acquired business
could also have a material adverse effect on the Company's  reputation,  and any
acquired  business could  significantly  under perform relative to expectations.
The Company is currently  facing all of these challenges and its ability to meet
them  over the long term has not been  established.  As a  result,  the  Company
cannot  be  certain  that it will be  able  to  integrate  acquired  businesses,
products or  technologies  successfully or in a timely manner in accordance with
its strategic objectives,  which could have a material adverse effect on overall
financial performance.

         In addition,  if the Company issues equity  securities as consideration
for any future  acquisitions,  existing  stockholders will experience  ownership
dilution and these equity securities may have rights,  preferences or privileges
superior to those of ITEC common stock. See "Future Capital Needs."

                                       13
<PAGE>

DEPENDENCE ON KEY PERSONNEL

         The success of the Company is dependent,  in part,  upon its ability to
attract and retain qualified management and technical personnel. Competition for
these personnel is intense,  and the Company will be adversely affected if it is
unable  to  attract  additional  key  employees  or if it loses  one or more key
employees. The Company may not be able to retain its key personnel.

COMPONENT AVAILABILITY AND COST; DEPENDENCE ON SINGLE SOURCES

         The  Company  presently  out-sources  the  production  of  some  of its
manufactured  products through a number of vendors located in California.  These
vendors assemble products,  using components purchased by the Company from other
sources  or from  their  own  inventory.  The  terms  of  supply  contracts  are
negotiated separately in each instance. Although the Company has not experienced
any  difficulty  over  the past  several  years in  engaging  contractors  or in
purchasing components,  present vendors may not have sufficient capacity to meet
projected market demand for ITEC products and alternative production sources may
not be available without undue disruption.

         Contract vendors generally perform  multi-step  quality control testing
prior to shipping their products to the Company.  The Company, in turn, includes
appropriate software,  performs additional tests on the products,  then packages
and ships products into the  distribution  channels.  In addition to buying such
items as printed circuit boards and other components from outside  vendors,  the
Company purchases and/or licenses software programs, including operating systems
and  intellectual  property  modules  (pre-written  software  code to  execute a
specifically  defined  operation).  The Company  purchases  these  products from
vendors  who  have  licenses  to sell  the  software  to the  Company  from  the
originators  of the software,  and have,  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 ITEC products are only available from single sources.
Although  alternative  suppliers are readily available for many components,  for
some  components  the process of  qualifying  replacement  suppliers,  replacing
tooling or ordering  and  receiving  replacement  components  could take several
months and cause substantial disruption to operations.  Any significant increase
in component prices or decrease in component  availability could have a material
adverse effect on the Company's business and overall financial performance.

POSSIBILITY OF CHALLENGE TO PRODUCTS OR INTELLECTUAL PROPERTY RIGHTS

         The  Company  currently  holds  no  patents.   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  its  software,  hardware  designs  or the
integration of the two. The Company  protects its software  source code as trade
secrets and makes its  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
application-specific  integrated circuits (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 that a  competitor  will be unable to replicate a feature or the benefit
in a similar product.

         Competitors may assert that the Company  infringes their patent rights.
If the Company fails to establish that it has not violated the asserted  rights,
it  could be  prohibited  from  marketing  the  products  that  incorporate  the
technology  and it could be liable for  damages.  The  Company  could also incur
substantial  costs to redesign  its products or to defend any legal action taken
against it. The Company has obtained U.S.  registration for several of its trade
names  or  trademarks,   including:   PCPI,  NewGen,   ColorBlind,   LaserImage,
ColorImage, ImageScript and ImageFont. These trade names are used to distinguish
the Company's products in the marketplace.

RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS

         The Company conducts  business  globally.  Accordingly,  future results
could be adversely  affected by a variety of uncontrollable and changing factors
including:  foreign currency  exchange  fluctuations;  regulatory,  political or
economic  conditions  in  a  specific  country  or  region;  the  imposition  of
governmental controls;  export license requirements;  restrictions on the export
of critical  technology;  trade  restrictions;  changes in  tariffs;  government
spending  patterns;  natural  disasters;  difficulties  in staffing and managing
international operations; and difficulties in collecting accounts receivable.

         In addition, the laws of certain countries do not protect ITEC products
and  intellectual  property  rights to the same extent as the laws of the United
States.

DEPENDENCE ON EXPORT SALES

         The Company intends to pursue international  markets as key avenues for
growth and to  increase  the  percentage  of sales  generated  in  international
markets. In the Company's past few fiscal years, sales outside the

                                       14
<PAGE>

United States  represented over half of its net sales. The Company expects sales
outside the United States to continue to represent a significant  portion of its
sales.  As  the  Company  continues  to  expand  its  international   sales  and
operations,  the business  and overall  financial  performance  may be adversely
affected  by  factors  such as those  described  under  "Risks  Associated  with
International Operations."

RELIANCE ON INDIRECT DISTRIBUTION

         ITEC products are marketed and sold through an established distribution
channel  of  value  added  resellers,  manufacturers'  representatives,   retail
vendors,  and  systems  integrators.  The  Company  has a network of dealers and
distributors in the United States and Canada,  in the European  Community and on
the  European  Continent,  as well as a growing  number of  resellers in Africa,
Asia, the Middle East,  Latin America,  and Australia.  The Company supports its
worldwide  distribution  network  and  end-user  customers  through  centralized
manufacturing,  distribution,  and repair operations headquartered in San Diego.
As of December 31,  2000,  the Company  directly  employed  fifteen  individuals
involved in marketing and sales activities.

         Sales  are  principally  made  through  distributors,  which  may carry
competing product lines. These distributors could reduce or discontinue sales of
ITEC products,  which could materially and adversely  affect the Company.  These
independent  distributors  may not devote  the  resources  necessary  to provide
effective sales and marketing support of ITEC products. In addition, the Company
is dependent  upon the  continued  viability  and  financial  stability of these
distributors,  many of which are small organizations with limited capital. These
distributors,   in  turn,  are  substantially   dependent  on  general  economic
conditions and other unique factors affecting the Company's markets.  Management
believes  that the future  growth and  success of the Company  will  continue to
depend in large  part upon its  distribution  channels.  The  business  could be
materially  and  adversely  affected if the Company's  distributors  fail to pay
amounts to the Company that exceed  reserves it has  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. To prevent
inventory  write-downs in the event 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 ITEC's  common stock  historically  has  fluctuated
significantly.  The Company's stock price could fluctuate  significantly  in the
future based upon any number of factors such as:  general  stock market  trends;
announcements of developments  related to ITEC's  business;  fluctuations in the
Company's operating results; a shortfall in revenues or earnings compared to the
estimates of securities  analysts;  announcements of technological  innovations,
new  products  or  enhancements  by  the  Company  or its  competitors,  general
conditions in the computer  peripheral  market and the imaging markets served by
the Company;  general  conditions  in the  worldwide  economy;  developments  in
patents or other intellectual property rights; and developments in the Company's
relationships with its customers and suppliers.

         In  addition,  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.  Similarly,  the market  price of ITEC common  stock may
fluctuate  significantly based upon factors unrelated to the Company's operating
performance.

ABSENCE OF DIVIDENDS

         The Company has not paid any cash dividends on its common stock to date
and it does not anticipate paying cash dividends in the foreseeable future.

APPOINTMENT AND REMOVAL OF OPERATIONAL RECEIVER

         On August 20,  1999,  at the request of Imperial  Bank,  the  Company's
primary lender, the Superior Court, San Diego appointed an operational receiver.
On August 23, 1999, the operational  receiver took control of ITEC's  day-to-day
operations.  Through  further  equity  infusion,  primarily  in the  form of the
exercise of warrants to purchase ITEC common stock,  operations  have continued,
and on June 21, 2000, the Superior Court,  San Diego issued an order  dismissing
the operational  receiver.  However,  in the future,  without additional funding
sufficient to satisfy  Imperial Bank and other  creditors,  as well as providing
for  working  capital,  there  can be no  assurances  that such  operations  can
continue.  In  addition,  the Company may not be able to satisfy all  conditions
required to sell shares under the Private  Equity Line of Credit  Agreement.  In
that case,  the Company  would likely need to raise money from other  sources in
order to  continue  to fund  operations.  Such  alternative  funding  may not be
available.  If such

                                       15
<PAGE>

funding is not obtained, the Company will need to reduce or suspend operations.

NASDAQ LISTING AND LIQUIDITY OF COMMON STOCK

         The Nasdaq(R)  SmallCap(R)  Market and Nasdaq Marketplace Rules require
an  issuer to  evidence  a minimum  of  $2,000,000  in net  tangible  assets,  a
$35,000,000 market capitalization or $500,000 in net income in the latest fiscal
year or in two of the last three fiscal years,  and a $1.00 per share bid price,
respectively. On October 21, 1999, Nasdaq notified the Company that it no longer
complied  with the bid price and net tangible  assets/market  capitalization/net
income  requirements for continued  listing on The Nasdaq SmallCap Market.  At a
hearing on December 2, 1999, a Nasdaq Listing  Qualifications  Panel also raised
public interest concerns relating to the Company's  financial  viability.  While
the Panel acknowledged that ITEC was in technical  compliance with the bid price
and market  capitalization  requirements,  the Panel was of the opinion that the
continued  listing of ITEC common stock on The Nasdaq Stock Market was no longer
appropriate.  This  conclusion was based on the Panel's  concerns  regarding the
future viability of the Company.  ITEC common stock was delisted from The Nasdaq
Stock Market  effective with the close of business on March 1, 2000. As a result
of being delisted from The Nasdaq SmallCap Market, stockholders may find it more
difficult to sell ITEC common  stock.  This lack of  liquidity  also may make it
more difficult for the Company to raise capital in the future.

         Trading of ITEC common  stock is now being  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.

         The  Securities  and  Exchange   Commission  adopted  regulations  that
generally  define a "penny stock" as any equity security that has a market price
of less than  $5.00 per  share.  Additionally,  if the  equity  security  is not
registered or authorized on a national securities exchange or the Nasdaq and the
issuer has net tangible assets under $2,000,000,  the equity security also would
constitute  a "penny  stock."  Our common  stock does  constitute  a penny stock
because  our common  stock has a market  price  less than  $5.00 per share,  our
common stock is no longer quoted on Nasdaq,  and our net tangible  assets do not
exceed  $2,000,000.  As ITEC common stock falls within the  definition  of penny
stock,  these  regulations  require  the  delivery,  prior  to  any  transaction
involving ITEC common stock, of a disclosure schedule explaining the penny stock
market  and  the  risks  associated  with  it.   Furthermore,   the  ability  of
broker/dealers to sell ITEC common stock and the ability of shareholders to sell
ITEC common stock in the  secondary  market would be limited.  As a result,  the
market liquidity for ITEC common stock would be severely and adversely affected.
The Company can provide no assurance  that trading in ITEC common stock will not
be subject to these or other  regulations in the future,  which would negatively
affect the market for ITEC common stock.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

            Not applicable.


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<PAGE>


PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         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.  A motion to dismiss the
lawsuit has been filed on behalf of the Company and those individual  defendants
that have been served. The Court will consider the motion at a hearing scheduled
for February 12, 2001.  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

         None

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

         10(a) Agreement to Acquire Shares, dated December 1, 2000, between ITEC
and Quik Pix, Inc.

         10(b)  Agreement to Acquire  Shares,  dated December 17, 2000,  between
ITEC and Pen Interconnect, Inc.

         10(c) Share Purchase  Agreement,  dated December 1, 2000,  between ITEC
and EdAdvantage.com, Inc.

         27       Financial Data Schedule

         Reports on Form 8-K

         The Company filed a report on Form 8-K dated December 13, 2000, related
to  the  placement  of  a  Convertible   Note  Purchase   Agreement   with  Amro
International, S.A., Balmore Funds, S.A., and Celeste Trust Reg.







                                       17
<PAGE>

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 2, 2001

IMAGING TECHNOLOGIES CORPORATION (Registrant)


By: /s/  BRIAN BONAR
--------------------
Brian Bonar
Chief Executive Officer
and Chairman of the Board of Directors




By: /s/  SCOTT KIEFER
---------------------
Scott Kiefer
Principal Financial and Accounting Officer



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