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 SEPTEMBER 30, 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: (619) 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 November
10, 1999, was 49,221,823



<PAGE>
<TABLE>
<CAPTION>

                                                                                                       PAGE

PART I - FINANCIAL INFORMATION

         ITEM 1.  CONSOLIDATED FINANCIAL STATEMENTS

<S>                                                                                                  <C>
         Consolidated Balance Sheets
              September 30, 1999 (unaudited) and June 30, 1999 (audited)                               2

         Consolidated Statements of Operations
              Three months ended September 30, 1999 and 1998 (unaudited)                               3

         Consolidated Statements of Cash Flows
              Three months ended September 30, 1999 and 1998 (unaudited)                               4

         Notes to Consolidated Financial Statements.                                                   5

         ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                         CONDITION AND RESULTS OF OPERATIONS                                           6

         ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
                         MARKET RISK                                                                  17



PART II - OTHER INFORMATION

         ITEM 1.  LEGAL PROCEEDINGS                                                                   17

         ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS                                           18

         ITEM 3.  DEFAULTS UPON SENIOR SECURITIES                                                     18

         ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                 18

         ITEM 5.  OTHER INFORMATION                                                                   19

         ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K                                                    19



SIGNATURES                                                                                            20

</TABLE>



                                       1


<PAGE>

<TABLE>
<CAPTION>

PART I. - FINANCIAL INFORMATION

ITEM 1.   CONSOLIDATED FINANCIAL STATEMENTS

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


                                     ASSETS
                                                                               SEPT. 30,         JUNE 30,
                                                                                    1999             1999
        Current assets
<S>                                                                             <C>              <C>
             Cash                                                          $           6     $         75
             Accounts receivable                                                   1,413            1,959
             Inventories                                                             439              552
             Prepaid expenses and other                                              366              577
                                                                           -------------     -------------
                 Total current assets                                              2,224            3,163

        Property and equipment, net                                                  927              986
        Capitalized software, net                                                  2,853            2,851
        Other                                                                        223              250
                                                                           -------------     -------------

                                                                            $      6,227     $      7,250
                                                                           =============     ============

                                   LIABILITIES AND SHAREHOLDERS' EQUITY

        Current liabilities
             Borrowings under bank note payable                             $      7,518      $     6,469
             Short-term debt                                                       3,960            5,010
             Current portion of long-term debt                                         -                -
             Accounts payable                                                      5,400            5,532
             Accrued expenses                                                      2,421            2,671
                                                                           -------------     -------------
                  Total current liabilities                                       19,299           19,682

        Long-term debt, less current portion                                           -                -
                                                                           -------------     -------------
                  Total liabilities                                               19,299           19,682
                                                                           -------------     -------------


        Stockholders' equity (deficit)
             Series A preferred stock, $1,000 par value, 7,500 shares
                authorized, 420.5 shares issued and outstanding                      420              420
             Series C preferred stock, $1,000 par value, 1,200 shares
                authorized, 236 shares issued and outstanding                          -                -
             Series D preferred stock, $2,000 stated value, 1,200
                shares authorized, 930 shares issued and outstanding               1,860            1,800
             Series E preferred stock, $5,000 stated value, 1,250
                shares authorized, 459 shares issued and outstanding               2,295            4,655
             Common stock, $0.005 par value, 100,000,000 shares
                Authorized; 41,942,860 shares issued and outstanding                 217              110
             Paid-in capital                                                      45,182           39,804
             Shareholder loans                                                      (105)            (105)
             Accumulated deficit                                                 (62,941)         (59,116)
                                                                           -------------     -------------
                  Total shareholders' equity (deficit)                           (13,072)         (12,432)
                                                                           -------------     -------------
                                                                           $       6,227    $       7,250
                                                                           =============    =============


</TABLE>


                 See Notes to Consolidated Financial Statements.




                                       2


<PAGE>

<TABLE>
<CAPTION>


                IMAGING TECHNOLOGIES CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
                        (IN THOUSANDS, EXCEPT SHARE DATA)
                                   (UNAUDITED)

                                                                                       1999             1998
             Revenues
<S>                                                                                <C>           <C>
                  Sales of products                                           $         940      $     6,721
                  Engineering fees                                                       25              395
                  Licenses and royalties                                                 88              163
                                                                               ------------      -----------
                                                                                      1,053            7,279
                                                                               ------------      -----------
             Costs and expenses
                  Cost of products sold                                                 693            4,047
                  Selling, general, and administrative                                3,378            3,640
                  Cost of engineering fees, research, and development                   649              585
                                                                               ------------      -----------
                                                                                      4,720            8,272
                                                                               ------------      -----------
             Income (loss) from operations                                           (3,667)            (993)
                                                                               ------------      -----------

             Other income (expense):
                  Interest, net                                                        (138)            (208)
                  Other                                                                 (20)               -
                                                                               ------------      -----------
                                                                                       (158)          (1,201)
                                                                               ------------      -----------

             Income (loss) before income taxes                                       (3,825)          (1,205)

             Net income (loss)                                                $      (3,825)    $     (1,205)
                                                                              =============      ===========

             Earnings (loss) per common share
                  Basic                                                       $        (0.12)  $        (0.10)
                                                                              ==============    =============
                  Diluted                                                     $        (0.12)  $        (0.10)
                                                                              ==============    =============

             Weighted average common shares                                          30,889           12,642
                                                                              =============     =============
             Weighted average common shares - assuming dilution                      30,889           12,642
                                                                              =============     =============

                                     See Notes to Consolidated Financial Statements.

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



                                       3



</TABLE>



<PAGE>


<TABLE>
<CAPTION>

                IMAGING TECHNOLOGIES CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                 THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
                        (IN THOUSANDS, EXCEPT SHARE DATA)
                                   (UNAUDITED)

                                                                                 1999             1998
                 Cash flows from operating activities
<S>                                                                       <C>              <C>
                    Net income (loss)                                     $    (3,825)     $    (1,205)
                    Adjustments to reconcile net income (loss) to
                 net
                      cash from operating activities
                         Non-cash special charges
                          Depreciation and amortization                            59              160
                          Amortization of capitalized software                    356                -
                          Stock issued for services                               326                -
                         Changes in operating assets and liabilities
                          Accounts receivable                                     546           (1,665)
                          Inventories                                             140            1,181
                          Prepaid expenses and other                              211             (415)
                          Accounts payable and accrued expenses                   543             (378)
                          Deferred revenue                                          -                -
                                                                          -----------       -----------
                                Net cash from operating activities             (1,644)          (2,322)
                                                                          -----------       -----------

                 Cash flows from investing activities
                    Prepaid licenses                                                 -               -
                    Capitalized software                                         (358)            (881)

                    Capital expenditures                                             -             (71)
                    Other                                                            -               -
                                                                          -----------       -----------
                                Net cash from investing activities               (358)            (952)
                                                                          -----------       -----------
                 Cash flows from financing activities
                    Net borrowings under bank lines of credit                   1,049           (1,041)
                    Net borrowings under short-term notes payable                   -            2,752
                    Net proceeds from issuance of common stock                    884            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                                     -             (137)
                                                                          -----------       ----------
                                Net cash from financing activities              1,933            1,271
                                                                          -----------       ----------

                 Net increase (decrease) in cash                                  (69)          (2,003)
                 Cash, beginning of period                                         75            3,023
                                                                          -----------       ----------
                 Cash, end of period                                      $         6       $    1,020
                                                                          ===========       ==========

                 Supplemental disclosure of cash flow information         $       192       $      130

                    Cash paid during the period for interest                        -                4
                    Cash paid during the period for income taxes


</TABLE>

                 See Notes to Consolidated Financial Statements.


                                       4


<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 September  30, 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  targets due to  insufficient  working
capital,  a sharp decline in contract  revenue,  and  relatively  high operating
costs in relation to current sales levels. The Company is taking a new strategic
direction  whereby  it will  manufacture  imaging  products  under its own name.
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. 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:






                                      5

<PAGE>



<TABLE>
<CAPTION>


                                                          EARNINGS (LOSS)       SHARES        PER-SHARE
                                                            (NUMERATOR)      (DENOMINATOR)      AMOUNT

         SEPTEMBER 30, 1998
<S>                                                          <C>               <C>             <C>
           Net loss                                          $(1,205)
             Preferred dividends                                  (6)
                                                             -------
           Basic and diluted EPS                             $(1,211)           12,642         $(0.10)
                                                             ========           ======         =======

         SEPTEMBER 30, 1999
           Net loss                                          $(3,825)
             Preferred dividends                                  (6)
                                                             -------
           Basic and diluted EPS                             $(3,831)           33,889         $(0.12)
                                                             ========          =======         =======


</TABLE>


NOTE 4.  INVENTORIES

<TABLE>
<CAPTION>
                                                                    SEPTEMBER 30,    JUNE 30,
                                                                        1999           1999

       Inventories
<S>                                                                    <C>            <C>
         Materials and supplies                                        $   40         $   50
         Finished goods                                                   399            502
                                                                       ------         ------
                                                                       $  439         $  552
                                                                       ======         ======
</TABLE>


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.

NOTE 6.  SERIES D AND E WARRANTS

On October 1, 1999,  the Company  requested a reduction  in the  exercise of the
Series D and E Warrants for a limited period of time in an effort to induce such
exercise by the holders of Series D and E Warrants at the reduced exercise price
and, as a result, the Company would receive additional capital from the proceeds
of such exercise.


  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.


                                       6

<PAGE>


OVERVIEW

     Imaging Technologies  Corporation develops,  manufactures,  and distributes
high-quality  digital imaging  solutions.  The Company  produces a wide range of
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.

     ITEC has made several strategic acquisitions during the past two years that
have expanded the Company's  strategic  position in the digital  imaging market.
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  manutacturing  ("OEM")  customers.  Over the past three
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 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 September 30, 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
effectively  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  may 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  $1.05  million  and $7.3  million  for the  quarters  ended
September 30, 1999 and 1998,  respectively.  Sales of product were $940 thousand
and  $6.7  million  for  the  quarters  ended   September  30,  1999  and  1998,
respectively.  The decrease in product sales from 1998 to 1999 was due primarily
to a decrease in sales of printer  products.  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.  Engineering fees were $25 thousand
and  $400  thousand  for  the  quarters  ended  September  30,  1999  and  1998,
respectively.  The decrease in 1999 compared to 1998 was primarily the result of
the Company's change in strategic  direction,  focusing more on internal product
development  and sales and less on engineering  for third parties.  License fees
were $88 thousand and $200 thousand for the quarter ended September 30, 1999 and
1998, respectively. The amount for 1998 was due primarily to the sales of a

                                       7

<PAGE>

license to a Korean  customer.  Licensing  fees are  expected to continue  their
decline due to the  Company's  focus on product  sales as opposed to  technology
licensing activities.

COST OF PRODUCTS SOLD

     Cost of products  sold were $693  thousand or 73% of product sales and $4.0
million or 60% of product  sales for the quarters  ended  September 30, 1999 and
1998,  respectively.  The  percentage  increase  in 1999 as compared to 1998 was
primarily  due to declining  margins on products  that had to be  discounted  in
order to accelerate cash flow.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

     Selling,  general and administrative  expenses were $2.6 million or 242% of
total revenue and $3.6 million or 50% of total  revenues for the quarters  ended
September 30, 1999 and 1998,  respectively.  Selling, general and administrative
expenses 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. The decrease in absolute
dollars in selling,  general and  administrative  expenses in the quarter  ended
September 30, 1999 as compared to the quarter  ended  September 30, 1998 was due
primarily to a decrease in administrative and personnel  expenses.  The increase
in these expenses as a percentage of net revenues is  attributable  primarily to
shortfalls  in revenue  expectations,  which did not support  the  then-existing
expenses of the Company.

COST OF ENGINEERING

     Engineering  costs were $649  thousand  million and $585  thousand  for the
quarters  ended  September 30, 1999 and September  30, 1998,  respectively.  The
Company  has  been  phasing  out  its  engineering  and  licensing   activities.
Engineering costs have been re-directed  toward the development of the Company's
branded products,  including  printers and associated  digital imaging products.
New  products  from these  activities  are  expected to begin  being  shipped to
customers during fiscal 2000.

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.

     The Company has received and  anticipates  that it will continue to receive
the  majority  of its cash from  collections  of  accounts  receivable  from its
customers,  distributors,  and OEMs.  These groups  generally  have a history of
timely  payments;  however,  an  increasing  amount of  international  sales can
increase accounts  receivable  balances due to traditionally  slower payments by
international customers. Any failure of the Company's customers, distributors or
OEMs to pay, or any significant  delay in the payment of, a material  portion of
the amounts  owing to the Company  could have a material  adverse  effect on the
Company.

     As of September  30,  1999,  the Company had  negative  working  capital of
approximately  $17.1  million,  an increase  of  approximately  $0.6  million as
compared to June 30, 1999.  The increase is primarily due  decreased  short-term
debt.

     The Company's  other  principal  source of liquidity at September 30, 1999,
were lines of credit with Imperial Bank,  which, at September 30, 1999,  totaled
$7.5 million.  The applicable  interest rate at September 30, 1999, was 11%. The
Company's  obligations  under  the  lines of credit  are  secured  by all of the
Company's accounts receivable, inventories, and other assets.

     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




                                       8

<PAGE>


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.

     Net cash used in operating  activities decreased to $1.6 million during the
quarter  ended  September 30, 1999,  from $2.3 million  during the quarter ended
September 30, 1998, due primarily to an increase in the Company's net loss.

     Net cash used in investing activities decreased to $358 thousand during the
quarter ended  September 30, 1999,  from $952 thousand  during the quarter ended
September  30, 1998,  due  primarily to  decreases in  capitalized  software and
capital expenditures.

     Net cash from  financing  activities  increased to $1.9 million  during the
quarter ended  September  30, 1999,  from $1.3 million  during the  year-earlier
quarter,  due to changes in the Company's debt structure.  Additionally,  in the
year-earlier  period,  the Company redeemed $2.2 million of its preferred stock.
No such redemptions were made in the period ended September 30, 1999.

     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
September 30, 1999, was approximately $0.6 million.

     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 Company anticipates
that its capital requirements will increase in future periods as it continues to
develop new products and increases its sales and marketing  efforts.  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.

YEAR 2000 COMPLIANCE

     The Company is aware of the issues  associated with the programming code in
existing  computer systems as the year 2000 approaches.  The "year 2000 problem"
is pervasive and complex as virtually every computer  operation will be affected
in some way by the  rollover  of the  two-digit  year  value to 00. The issue is
whether computer systems will properly recognize date sensitive information when
the  year  changes  to  2000.  Systems  that  do  not  properly  recognize  such
information could generate erroneous data or cause a system to fail.

     Management  does not  anticipate  that the Company  will incur  significant
operating  expenses or be required to invest heavily in other  computer  systems
improvements  to be year  2000  compliant.  The  Company  plans  to  devote  the
necessary  resources to resolve significant year 2000 issues in a timely manner;
however,  if the  Company,  its  customers,  vendors or others with whom it does
significant  business  are unable to  resolve  external  processing  issues in a
timely manner, it could result in material adverse effect on the Company.

     The Company has  performed an analysis of all of its products  manufactured
after  January 1, 1997 and has  determined  that all such products are year 2000
compliant.  This analysis covered the Company's printer  controller  technology,
laser and  dye-sublimation  printers,  as well as software products and computer
and digital  camera  memory  modules.  The  Company's  printers do not currently
contain any internal  clock  devises that monitor or recognize the change of the
date and  therefore the change of year from 1999 to 2000 should not effect their
operation.


                                        9

<PAGE>

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  September  30,  1999,  the  Company  had   accumulated   losses  of
approximately $62.2 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 or suspend operations.

Fluctuation of Quarterly Performance

     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


                                       10

<PAGE>


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.

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


                                       11


<PAGE>

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 on Adobe Relationship

     The  Company's  relationship  with Adobe as an  authorized  "Co-development
Partner" to implement  the inclusion of Adobe's  PostScript  language on printer
controllers  and in  software  products  is an  integral  part  of its  business
strategy. There can be no assurance that this relationship will be successful or
that  it  will  remain  in  force  for  some  time to  come.  Loss of the  Adobe
relationship could have a substantial negative effect on future revenues.

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.

Acquisitions

     In order  to grow  its  business,  the  Company  may  continue  to  acquire
businesses that it believes are complementary.  The successful implementation of
this strategy depends on the Company's ability to identify suitable  acquisition
candidates,   acquire  such  companies  on  acceptable  terms,  integrate  their
operations  and  technology  successfully  with  those  of the  Company,  retain
existing  customers,  and maintain the goodwill of the acquired business.  There
can be no  assurance  that  the  Company  will  be  able  to  identify  suitable
acquisition  candidates,  acquire  any  such  candidates  on  acceptable  terms,
integrate their  operations or technology  successfully,  retain  customers,  or
maintain  the  goodwill  of  the  acquired  business.   Moreover,   in  pursuing
acquisition opportunities,  the Company may compete for acquisition targets with
other companies with similar growth




                                       12


<PAGE>


strategies.  Some of these  competitors may be larger and have greater financial
and other resources than the Company.  Competition for these acquisition targets
could also result in increased  prices of  acquisition  targets and a diminished
pool of companies available for acquisition.  If the Company is unable to manage
internal or acquisition-based growth effectively, the Company will be materially
and adversely affected.

     Acquisitions involve a number of risks,  including:  (1) the integration of
acquired  products and  technologies in a timely manner;  (2) the integration of
businesses  and employees  with the Company's  business;  (3) the  management of
geographically-dispersed  operations;  (4)  adverse  effects  on  the  Company's
reported operating results from acquisition-related  charges and amortization of
goodwill;  (5) potential  increases in stock compensation  expense and increased
compensation expense resulting from newly-hired employees;  (6) the diversion of
management attention;  (7) the assumption of unknown liabilities;  (8) potential
disputes with the sellers of one or more acquired entities; (9) the inability of
the Company to maintain customers or goodwill of an acquired business;  (10) the
need to divest  unwanted  assets or products;  and (11) 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 reputation
of the Company as a whole, and any acquired business could  significantly  under
perform relative to the Company's 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,  there can be no assurance that the Company 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 the Company.

     Due to all of the  foregoing,  the  Company's  execution of an  acquisition
strategy or any individual  completed or future  acquisition may have a material
adverse  effect on the  Company.  In  addition,  if the  Company  issues  equity
securities as consideration for any future acquisitions,  existing  stockholders
will experience further ownership dilution and such equity securities could have
rights, preferences, privileges, or other rights superior to those of the Common
Stock. See "Future Capital Needs," and "Management's  Discussion and Analysis of
Financial Condition and Results of Operations."

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

     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.


                                       13

<PAGE>


     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.

International Operations

     The Company conducts business globally.  Accordingly,  the Company's future
results could be adversely  affected by a variety of uncontrollable and changing
factors  including  foreign currency  exchange rates;  regulatory,  political or
economic  conditions in a specific country or region;  trade protection measures
and other regulatory  requirements;  government  spending patterns;  and natural
disasters,  among  other  factors.  Any or all of  these  factors  could  have a
material adverse impact on the Company's future international  business in these
or other  countries  and on the  Company's  financial  condition  and results of
operations.

Dependence On Export Sales

     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,




                                       14


<PAGE>


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 growing  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.

Impact of Asian Financial Crisis

     The  financial  crisis in Asia resulted in the  cancellation  of orders and
substantial losses, and ITEC's other  international  operations and export sales
may be effected by future trends and foreign restrictions.

     The Company conducts  business globally and intends to continue its pursuit
of  international  markets.  In  the  past,  the  Company  experienced  contract
cancellations and write-offs of significant  accounts  receivable related to the
economic  crisis in Asia.  There can be no assurance that the Company's  overall
financial performance will not be further negatively affected by this situation.

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.


                                       15

<PAGE>


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.  As of November 10, 1999, the Company had
49,221,823  shares of common stock reserved for possible future  issuances upon,
among other things,  conversion of preferred  stock and exercise of  outstanding
options and warrants.

     The Company expects to 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.  Furthermore,  if the exercise price of any outstanding
or issuable  options or warrants or the conversion  ratio of any preferred stock
is lower  than the  dollar  value per  share of common  stock at the time of the
exercise or  conversion,  then the dollar  value per share of common stock would
decrease because the number of shares of common stock outstanding would increase
without a corresponding  increase in the dollar amount assigned to shareholders'
equity.

     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 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
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.

     Although 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,  ITEC common  stock,  albeit  currently  less than
$5.00 per share,  does not  constitute  a penny  stock when our common  stock is
quoted on Nasdaq and our net tangible  assets  exceed $2.0  million.  If, in the
future,  ITEC common stock falls  within the  definition  of penny stock,  these
regulations would 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


                                       16

<PAGE>


of  broker/dealers  to sell the common stock and the ability of  shareholders to
sell their securities in the secondary market would be limited. As a result, the
market liquidity for ITEC common stock would be severely and adversely affected.
We can provide no assurance that trading in ITEC  securities will not be subject
to these or other  regulations in the future,  which would negatively affect the
market for the Company's securities.

Year 2000 Compliance (Y2K)

     The Company is aware of the issues  associated with the programming code in
existing  computer systems as the year 2000 approaches.  The "year 2000 problem"
is pervasive and complex as virtually every computer  operation will be affected
in some way by the  rollover  of the  two-digit  year  value to 00. The issue is
whether computer systems will properly recognize date sensitive information when
the  year  changes  to  2000.  Systems  that  do  not  properly  recognize  such
information could generate erroneous data or cause a system to fail.

     Management  does not  anticipate  that the Company  will incur  significant
operating  expenses or be required to invest heavily in other  computer  systems
improvements  to be year  2000  compliant.  The  Company  plans  to  devote  the
necessary  resources to resolve significant year 2000 issues in a timely manner;
however,  if the  Company,  its  customers,  vendors or others with whom it does
significant  business  are unable to  resolve  external  processing  issues in a
timely manner, it could result in material adverse effect on the Company.

     The Company has  performed an analysis of all of its products  manufactured
after  January 1, 1997 and has  determined  that all such products are year 2000
compliant.  This analysis covered the Company's printer  controller  technology,
laser and  dye-sublimation  printers,  as well as software products and computer
and digital  camera  memory  modules.  The  Company's  printers do not currently
contain any internal  clock  devises that monitor or recognize the change of the
date and  therefore the change of year from 1999 to 2000 should not effect their
operation.

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.

     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. See "Item 2 -- Liquidity and Capital Resources."


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

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,



                                       17


<PAGE>

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 late November, 1999. 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,  Nahid  Nazariaqn  Behfarin filed a lawsuit on
behalf of herself and others similarly  situated against the Company and certain
present and past  officers and directors of the Company  alleging  violations of
Federal  laws  between the dates of April 21,  1998,  and  October 9, 1998.  The
lawsuit was served on the company on November 18, 1999.  The Company has not yet
had an opportunity  to evaluate the  allegations of the lawsuit or to discuss it
with legal counsel;  however,  based upon the information currently available to
it, the Company  believes  the  allegations  are untrue and  without  merit  and
intends to vigorously defend against them on its own behalf and on behalf of the
other defendants.

     Throughout  Fiscal Year 1999, 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.





                                       18


<PAGE>


ITEM 5.  OTHER INFORMATION

None.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits:

     27.1  Financial Data Sheet


 (b) Reports on Form 8-K - No reports on Form 8-K were filed during the quarter
ended September 30, 1999.

    One report on Form 8-K was filed during the quarter ended September 30,
    1999. Such report was filed on August 20, 1999 in connection with the
    appointment of a receiver to run the Company's day-to-day operations.




<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: November 19, 1999

IMAGING TECHNOLOGIES CORPORATION (Registrant)

By: /s/  BRIAN BONAR
--------------------

Brian Bonar
Chief Executive Officer
and Principal Financial and Accounting Officer


<PAGE>



                                  EXHIBIT INDEX


27.1....................................................Financial Data Sheet