UNITED STATES OF AMERICA
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K
                    XANNUAL REPORT UNDER SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                     FOR THE FISCAL YEAR ENDED JUNE 30, 1999

                           COMMISSION FILE NO. 0-12641

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

                                      ITEC

                        IMAGING TECHNOLOGIES CORPORATION
             (Exact Name of Registrant as Specified in its Charter)

         DELAWARE                                              33-0021693
(State or Other Jurisdiction of Inco                    (IRS Employer ID No.)

                             15175 Innovation Drive
                           San Diego, California 92128
                                 (858) 613-1300
   (Address of Principal Executive Offices and Registrant's Telephone Number,
                              Including Area Code)

                Securities registered under Section 12(b) of the
                    Exchange Act: NONE Securities registered
                    under Section 12(g) of the Exchange Act:

                         COMMON STOCK, $0.005 PAR VALUE

Indicate  by a check mark  whether  the  registrant:  (1) has filed all  reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes X No |_|

Indicate by a check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. Yes X No |_|

At October 11,  1999,  the  aggregate  market  value of the voting stock held by
non-affiliates of the registrant was approximately $11,694,266 based on the last
trade price as reported by The Nasdaq  SmallCap(R)  Market. For purposes of this
calculation,  shares owned by officers, directors, and 10% stockholders known to
the registrant have been excluded.  Such exclusion is not intended, nor shall it
be  deemed,  to  be an  admission  that  such  persons  are  affiliates  of  the
registrant.

At October 11, 1999,  there were 43,823,672  shares of the  registrant's  Common
Stock, $0.005 par value, issued and outstanding.

Information  required by Part III of this Form 10-K is  incorporated  therein by
reference to the Company's  definitive  Proxy Statement with respect to its 1999
Annual Meeting of  Stockholders to be filed pursuant  toRegulation  14A or to an
amendment to the Form 10-K within 120 days after June 30, 1999.


<PAGE>
FORWARD LOOKInG STATEMENTS

================================================================================
In  addition to  historical  information,  this  Annual  Report on Form 10-K may
contain   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  judgement  on the future
direction  of the  business,  such risks and  uncertainties  could cause  actual
results  to differ  materially  from any  future  performance  suggested  below.
Readers  are  cautioned  not to  place  undue  reliance  on the  forward-looking
statements,  which speak only as of the date of this Annual Report.  The Company
undertakes no obligation  to publicly  release any revisions to  forward-looking
statements  to reflect  events or  circumstances  arising after the date of this
document.  See "Risks and  Uncertainties."  References  in this Annual Report on
Form 10-K to "ITEC" and the  "Company" are to Imaging  Technologies  Corporation
and  its  wholly-owned  direct  and  indirect  subsidiaries,  Personal  Computer
Products, Incorporated, a California corporation (PCPI), NewGen Imaging Systems,
Incorporated,  a  California  corporation  (NewGen),  Color  Solutions,  Inc,  a
California  corporation  (CSI), ITEC Europe,  Ltd., formed under the laws of the
United Kingdom,  (ITEC Europe),  AMT Accel UK Ltd., formed under the laws of the
United Kingdom (AMT) and DealSeekers.com,  Incorporated,  a Delaware corporation
(DealSeekers.com).

PART I

================================================================================
ITEM 1.

BUSINESS
--------

Imaging   Technologies   Corporation   ("ITEC")  develops,   manufactures,   and
distributes  high-quality digital imaging solutions. The Company produces a wide
range of printer and imaging products for use in graphics, publishing, and other
business and technical  markets.  In the 1980's,  ITEC began the  development of
core  technologies  related to the design and  development  of  controllers  for
non-impact  printers.  During the past few years,  the Company has  expanded its
product  offerings to include  monochrome  and color  printers,  external  print
servers,  multifunction  peripheral  devices,  such as  copiers,  scanners,  and
facsimile machines, and software to improve the accuracy of color reproduction.


ITEC  manufactures  advanced  digital color and monochrome  output devices for a
number of specialized publishing  applications,  including electronic pre-press,
graphic design,  on-demand printing,  and business and technical office markets.
The  Company's  new  generation  of products  incorporate  advanced  printer and
imaging controller  technologies to produce faster, output of enhanced images at
competitive  prices.  All of ITEC's color laser printers,  and digital  proofing
systems  that  incorporate  the  Company's   proprietary   ColorBlind(R)   Color
Management software.

ITEC's  ColorBlind  Color  Management  software  is  a  suite  of  applications,
utilities  and tools  designed  to create,  edit,  and apply  industry  standard
International  Color  Consortium  ("ICC")  profiles that produce  accurate color
rendering  across a wide range of peripheral  devices.  The moniker  "ColorBlind
Aware" is growing to be recognized as an industry standard for color accuracy as
manufacturers  integrate  ColorBlind's  Color  Management  resources  into their
product designs.

The Company  benefits from  technology  alliances with industry  leaders such as
Adobe Systems Inc.  ("Adobe") and NEC  Electronics,  to develop embedded printer
controller  and  digital  imaging  technology.  As one  of  only  a  handful  of
authorized  Adobe  PostScript(R)  Development  Partners,  ITEC produces  printer
controllers  that  provide  performance  advantages  for its OEM  customers in a
modular form.  ITEC's  customers also benefit by outsourcing  their  engineering
development and manufacturing to ITEC, thus achieving faster time-to-market.

Imaging Technologies  Corporation (NASDAQ: ITEC) was incorporated in March, 1982
under the laws of the State of California, and reincorporated in May, 1983 under
the laws of the State of Delaware. The Company's principal executive offices are
located at 15175 Innovation Drive, San Diego, CA 92128. The Company's main phone
number is (858) 613- 1300.

MARKET OVERVIEW
---------------

ITEC's principal  markets  encompass  desktop digital imaging and printing.  The
Company's  primary  market  segments  include  image  management  to control the
function of printers and/or digital  copiers,  and digital printers and proofing
devices  that  take an image to the plate  making  stage  prior to  lithographic
reproduction.  Color  integrity is an important  underlying  requirement  in the
imaging process. The widespread use of color applications at the desktop, demand
for higher quality color reproduction, expanded use of the internet for document
dissemination,  growth of office networks,  and the increased acceptance and use
of digital photography are some of the factors that influence these markets.


                                      -2-
<PAGE>


The  desktop  color laser  printer  market is a  rapidly-growing  segment of the
computer printing  industry.  International  Data Corporation  ("IDC") estimates
shipments of desktop color laser printers will grow at a compound annual rate of
56% through the year 2002.  ITEC believes this is largely due to increased  user
education on the benefits of color in office  documents and the  availability of
higher-quality,  easy-to-use,  lower-priced  desktop color laser  printers.  IDC
estimates that, by 2002,  desktopcolor  laser printer shipments will increase to
91% of the total  printer  market  (projected  to reach 22 million  units in the
United States).

Changes in the  technology of document  creation,  management,  production,  and
transmittal have been  transforming the imaging market.  The growth of networks,
the increased  availability and dissemination of documents on the internet,  and
the rapid adoption of color at the desktop have  significantly  changed printing
and document  management.  In the last few years,  the market has been  reshaped
from one dominated by dedicated printers and scanners at the workstation,  to an
emphasis on document workflow using network-shared  imaging products than enable
remote document delivery and distribution.  "Print-and-Distribute" has given way
to "Distribute-and-Print".

Imaging  professionals have been forced to deal with ever more complex documents
that must be distributed throughout the business enterprise.  Powerful authoring
applications enable the creation of documents, the components of which originate
from multiple  locations around the world.  Adobe Systems'  Acrobat(R)  Portable
Document Format (PDF(R)) and PostScript  printing  technologies have become more
important  elements in the document  imaging  workflow  due to their  ability to
improve  the  efficiency  of  digital  master  document   transmission  and  the
reliability of printing at remote locations.  As large  corporations  master the
challenges  of image  and  document  management,  the  resulting  solutions  are
expected to migrate to small business and the home office.

ITEC is working to deliver solutions that meet the current and future demands of
the imaging  market:  increased  internet  usage,  better print quality,  faster
printed  output,  easier  and  more  consistent  color  rendering,  and  reduced
dependence on device-specific applications.  Imaging productivity is expected to
drive ITEC's markets as customers shift from the print and distribute mode to an
on-demand global distribute and print environment.

BUSINESS STRATEGY
-----------------

The Company's  objective is to be a global  market leader in digital  imaging by
delivering higher-quality,  easy-to-use products and technology. ITEC is focused
on the continued  development and manufacturing of advanced  integrated  digital
imaging solutions.  The Company's principal target markets include: (1) embedded
printer controller technology for non-impact printers (laser, copier, duplicator
and  ink  jet);   (2)  digital   print   controllers   and  print   servers  for
printing-on-demand;  (3) specialized  printers and digital  proofing devices for
graphics and publishing,  and a number of niche business  applications;  and (4)
color management software products.

PRINTER CONTROLLER PRODUCTS
---------------------------

ITEC's core competence is in the design, development, and integration of digital
printing  controller  technology.  A printer  controller manages the intelligent
functions of a modern laser or other  non-impact  printer.  The  controller is a
powerful image management microcomputer that directs the output functions of the
printer,  including the layout,  form,  font, and function of the printed image.
ITEC  develops  and  manufactures  embedded  imaging  controllers  for  original
equipment  manufacturers  (OEMs). The Company's customers benefit by outsourcing
their  engineering   development  and   manufacturing,   thus  achieving  faster
time-to-market. In an age of rapid and persistent technology change, the ability
to achieve faster time-to-market is critical to product success.

ITEC has  established  relationships  with  leading  printer  manufacturers  and
marketers throughout the world and with Adobe Systems, Inc. As one of only three
independent  authorized  Adobe  PostScript  Development  Partners,  ITEC has the
ability to embed the core technology of PostScript  into every image  management
product.  Adobe  PostScript  is the most widely  accepted  printing  and imaging
technology for retail printing service companies, corporations,  publishers, and
government agencies.  Of all commercial  publications printed, 75% are imaged on
PostScript  devices.  These include monochrome and color printers,  imagesetters
and plate making devices, and direct digital printing systems.

The newest release,  Adobe PostScript  3(TM),  broadens the PostScript  standard
beyond its use as a page  description  language into a fully optimized  printing
system  that  addresses  a broad  range of new  requirements.  By  incorporating
PostScript  technology,  ITEC's  controllers  deliver  advanced  features  and a
universal operating environment for digital documents.

ITEC  produces a range of  integrated  controller  solutions  for  printers  and
multifunction  peripherals.  The Company's new embedded imaging  controllers are
sold  to OEM  customers  for  integration  into  digital  color  and  monochrome
printers.  ITEC's  ImageScript(TM)  controller  accommodates a wide range of new
printer designs.  Features  include:  true Adobe  PostScript 3 compatibility,  a
powerful  reduced-instruction-set-computer ("RISC") processor, image enhancement
co-processors, and printing resolution up to 1200 dots-


                                      -3-
<PAGE>
per-inch  ("dpi").  The  modular  architecture  of ITEC  controllers  allows OEM
customers to select from a range of options  including  processor  speed,  color
management, resolution and communication/networking connectivity.

DIGITAL PRINT CONTROLLERS; PRINTING-ON-DEMAND
---------------------------------------------

Digital color copiers and powerful external  controllers comprise the foundation
for the  print-on-demand  movement.  Modern  digital  copy  machines  bypass the
desktop  printer  in  the  digital  workflow  and  go  directly  to  reproducing
quantities of collated and bound  documents.  This market fits ITEC's  technical
strengths in embedded print controllers and color management technology.

For the monochrome digital duplicator market,  ITEC produces an Adobe PostScript
3 raster  image  processing  ("RIP")  controller.  Unlike a  copier,  a  digital
duplicator  creates a print master that is placed on a drum within the unit. The
drum then  transfers  the image to the  paper as with  traditional  lithography.
Digital duplicators are used for short run printing and provide significant cost
savings over  conventional copy machines.  Primary users of digital  duplicators
include quick-print shops,  churches,  schools,  and government offices.  ITEC's
digital  duplicator  controller has a universal  architecture  that allows it to
manage the output functions of a wide range of duplicator  products  produced by
most major manufacturers.

DIGITAL PRINTERS
----------------

ITEC's  new  printer  product  line  features  network  compatibility  and Adobe
PostScript 3 technology. The products provide higher performance, enhanced image
quality, and advanced page processing. Under the ITEC brand, the Company sells a
range of products in both monochrome and color.  The Company's  product strategy
is to produce value-added  printers that meet the more exacting  requirements of
specialized segments of the market.

The  LaserImage(TM)  1100, with Adobe  PostScript 3 features 20  page-per-minute
outputs at a print resolution of 1200x1200 dpi. The Company's image  enhancement
technology  delivers  outstanding  quality  and  page  processing  enhancements.
Additional features add flexibility and convenience, including: expandable paper
trays, page size support up to ledger/A3;  and duplexing (2-sided printing). The
LaserImage(TM)  1100 is provided  as a solution  for  general  office,  finance,
marketing, and desktop publishing.

The  LaserImage  1200 series of laser  printers are designed to quickly  produce
full-bleed  proofs for pre-press and graphic arts  applications.  These printers
are a workgroup solution for printing complex documents or high volume printing.
The 1200 series printers feature Adobe PostScript 3 with a RISC-based controller
designed  and  engineered  by  ITEC.   Models  are  available  in  a  number  of
configurations that provide network connectivity.

The Company's new ColorImage(R)  2500 combines ITEC's  award-winning  ColorBlind
Matchbox color management system with Adobe PostScript 3. ITEC's custom designed
controller  technology is built around the ultra-fast  64-bit 167 MHz NEC Vr4310
RISC processor to provide the performance necessary for complex color pages. The
2500  model  features:  up to  1200 x  1200  dpi  resolution,  a  powerful  RISC
processor,  a special image  enhancement  co-processor,  and a precision  toning
system to deliver crisp, high quality,  color-correct  images.  Print speed is 4
color pages per minute and 16 monochrome pages per minute.

The ITEC  ColorImage 6000 Digital Color Proofing System meets the needs of print
production  users,   graphic  artists,   photography   studios,   and  pre-press
departments.  A 6-color  inkjet print engine  delivers a wide color  spectrum to
ensure smooth  gradations and  highlights.  The 6000 model is delivered with the
Company's  award-winning  ColorBlind  color  management  software and a powerful
external  333 MHz,  Windows  NT  server/controller  for  simultaneous  spooling,
processing, and printing.

COLOR MANAGEMENT
----------------

Color  reproduction is one of the largest single  challenges  facing the imaging
industry.  Customers  demand  systems  that  are  easy to use,  predictable  and
consistent.  The problems  associated with color  reproduction  relate to "color
space." The color space for printed  materials is different from the color space
for devices such as cameras,  scanners and computer monitors. A color management
system  is  needed  so users can  convert  their  files  for use with  different
devices.  The varying  characteristics  of each device are  captured in a device
profile. The ICC has established a standard for the format for these profiles.

ITEC's  ColorBlind(R)  Color  Management  software  is a suite of  applications,
utilities,  and tools that allow users to precisely create ICC profiles for each
device in the color workflow  including  scanners,  monitors,  digital  cameras,
printers,  and other  specialized  digital color input and output devices.  Once
profiled,  ColorBlind  balances these profiles to produce accurate,  consistent,
and reliable color rendering from input to output.

                                   -4-
<PAGE>


ColorBlind  ProveIt!  allows a user to  calibrate  and build an ICC Profile of a
monitor  visually or with the use of an  instrument.  This System  provides  the
capability  of  calibrating  Monitors  over the  Network or  Internet  to assure
accurate and consistent color viewing.

ColorBlind  MatchBox is an all in one color matching system.  MatchBox  provides
all the tools to match from scan to print automatically  including ICC profiling
software, measuring instrument,  software for fine tuning and an enabled utility
for precise spot  calibration.

ColorBlind ColorMatic creates custom quality profiles for image capture, display
and output devices. ColorMatic creates profiles for scanners and digital cameras
with its own custom target that is designed for ease of use.

ColorBlind CheckMate is a system designed for OEM's that automatically  provides
monitor to printer color  matching.  CheckMate  allows the user to view the true
colors of an image prior to it being printed.

ColorBlind Professional is an ICC profiling application on all color devices for
color  professionals.  It includes adjustment tools for printer black generation
(UCR, GCR, etc.),  highlight and shadow clipping and limiting,  variable amounts
of color  measurements up to 1400 patches,  Hi-Fi  profiling,  and utilities for
fine tuning profiles and matching spot and Pantone
colors.

ColorBlind Edit/Edit Server is a professional  profile editing  application.  It
allows the user to fine-tune  any ICC profile with a full range of editing tools
such  as  Tone,  Tone  in  Gray,  Brightness/Contrast/Saturation,  Global  Color
Correction,  Selective  Color  Correction  and  Gradation.  It  includes a batch
processing module (Edit Server) for applying  profiles or attaching  profiles to
images in a batch mode either on the host, or across a network.

ColorBlind Parachute is a Postscript ICC color server application. It allows the
user to build print queues for digital proofing and multiple  printer  matching.
Parachute  applies ICC profiles to any color element in a Postscript  file, then
creates a new color-correct  Postscript file and  automatically  sends it to the
desired printer, to create a fully-automated ICC-compatible Postscript workflow.

"ColorBlind  Aware"  is being  recognized  as an  industry  standard  for  color
accuracy, as printer,  scanner, and monitor manufacturers integrate ColorBlind's
Color  Management  into  product  designs.  ColorBlind  is sold as a  standalone
application or licensed by OEM's for resale bundled with peripherals.

OPERATIONS
----------

INTERNATIONAL
-------------

The Company intends to pursue international  markets as avenues for growth. ITEC
Europe  provides  both sales and support  functions to customers  within the UK,
European  Community  (EC) and  Eastern  European  Block for ITEC's  printer  and
imaging  products.  The Company  expects export sales to continue to represent a
portion  of its  sales.  For the years  ended  June 30,  1999,  1998,  and 1997,
international   sales   represented   16%,  56%,  and  57%  of  total  revenues,
respectively.

International  sales and operations,  however,  are subject to risks such as the
imposition of governmental controls,  export license requirements,  restrictions
on the export of critical technology, currency exchange fluctuations,  political
instability,  trade restrictions,  changes in tariffs,  difficulties in staffing
and managing  international  operations and collecting accounts  receivable.  In
addition,  the laws of certain  countries do not protect the Company's  products
and  intellectual  property  rights to the same extent as 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.

CONSOLIDATED OPERATIONS AND COMPANY HEADQUARTERS
------------------------------------------------

During  fiscal  1999,  the  Company  has  worked  at  consolidating   staff  and
facilities.  Staff  consolidation  resulted in a 23% decrease in staff worldwide
due to outsourcing and the elimination of redundant positions.

The Company consolidated its corporate headquarters  facility,  which houses all
of ITEC's U.S.  operations  previously  located in seven  separate  locations in
Northern and Southern  California.  The Company occupies 45,000 square feet of a
60,000 square foot building, with an option to expand. Consolidating to a single
facility has reduced the amount of space the Company  occupies by 35%.  Assuming
the Company can  sublease  some of its  existing  space,  it will  benefit  from
additional  savings in lease  payments.  The Company's  headquarters  facilities
house all of the Company's engineering,  sales and marketing,  customer support,
accounting, production, and warehousing departments.

INTERNET OPERATIONS
-------------------

The Company  launched an  E-Commerce  web site  designed to offer  computer  and
imaging hardware,  software, and consumables.  DEALSEEKERS.COM is an interactive
internet  catalog showroom  featuring  thousands of computer and digital imaging
products. The internet address is www.dealseekers.com.


                                      -5-
<PAGE>


ITEC developed the site to create new channels for a growing family of products.
The  site  was  developed  internally  and  management  is  exploring  strategic
partnering  relationships  to further  enhance  the value of the  division.  The
Company plans to use  DealSeekers.com  as a tool to promote and build its dealer
network and expand  distribution  of the Company's  digital imaging and software
products.

ITEC's board of directors  approved a private  placement  for  investment in the
company's  DealSeekers.com web site. The Company believes there is a substantial
opportunity  to transform  DealSeekers.com  into a brand name shopping site that
will provide retail  consumers and businesses with the ability to quickly source
computer   products,   evaluate  value   alternatives  and  securely  execute  a
transaction.  The company  formed a dedicated  board of directors to oversee the
continued  development of DealSeekers.com  and will look at additional  funding,
including the possibility of an initial public offering during 2000.

During  fiscal 1999,  ITEC  launched an  additional  web site,  COLOR.COM,  as a
resource  center to provide  information on the highest  quality  correct color.
This new site allows  consumers to purchase ITEC products  including  ColorBlind
software.  Another,  unique software product offered by ITEC is ProveIt!,  which
provides  internet  users the  ability to view and print  colorimages  correctly
across the Web. The new ITEC web site also serves as a resource center for color
imaging,   with  information   including  white  papers  on  color  imaging  and
management,  links to color consultants and experts, and products.  The internet
address is www.color.com.

SALE OF THE COMPANY'S MEMORY PRODUCTS BUSINESS
----------------------------------------------

During fiscal 1999, ITEC sold its memory business operations, which consisted of
Prima International and McMican Memory.  Prima  International,  a distributor of
memory  modules,  was  acquired  by PCPI  Technologies  in  1993.  McMican  is a
manufacturer  of digital memory  products for data storage and exchange  between
digital  cameras  and  imaging  systems  and  was  acquired  by ITEC  1998.  The
businesses sold and/or  discontinued were characterized by low margins and price
instability,  which  were  incompatible  with  the  strategic  direction  of the
Company.

MARKETING AND DISTRIBUTION CHANNELS
-----------------------------------

ITEC's  products  are  marketed  and sold  through an  established  distribution
channel of value-added resellers (VARS), manufacturer's representatives,  retail
vendors, and systems integrators. ITEC has a network of dealers and distributors
in the  United  States,  Canada,  and  Europe.  The  Company is  expanding  with
additional  resellers in Africa,  Asia,  the Middle  East,  Latin  America,  and
Australia.

ITEC supports its worldwide  distribution network and end-user customers through
centralized  manufacturing,  distribution,  and repair operations. The Company's
San Diego headquarters serve distribution in North America,  South America,  the
Pacific  Rim,  and Asia.  ITEC  Europe,  located in a suburb of London,  manages
distribution and services for customers in Europe, Africa, and the Middle East.

MANUFACTURING, PRODUCTION, AND SOURCES OF SUPPLY
------------------------------------------------

During  fiscal  1999,  ITEC formed a strategic  relationship  to  outsource  the
majority  of its  manufacturing.  This  arrangement  gives ITEC the  latitude to
expand  its   business   base   without   the  cash  drain  of   maintaining   a
state-of-the-art-  manufacturing center. The Company's primary manufacturing and
product  fulfillment is outsourced to Pen Interconnect's  ISO9000  manufacturing
facility  "InCirT   Technologies"   division  in  Irvine,   California.   InCirT
Technologies  manufactures and fulfills orders for the Company's software, color
and monochrome  printers,  and controller  products.  InCirT performs multi-step
quality  control  testing  prior to shipping  products;  and  packages and ships
products to ITEC customers.

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.  The Company  has,  from time to time,
directly   licensed  system  software  that  is  either  embedded  or  otherwise
incorporated  in certain ITEC  products.

RESEARCH AND  DEVELOPMENT
-------------------------

The Company monitors new technology developments and coordinates with suppliers,
distributors and dealers to enhance existing products and lower costs.  Advances
in technology require investment to maintain the Company's market position.

COMPETITION
-----------

The  markets  for the  Company's  products  are highly  competitive  and rapidly
changing. The Company's ability to compete in its markets depends on a number of
factors,  including  the  success and timing of product  introductions,  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


                                      -6-
<PAGE>


products.  The Company has reduced prices on certain of its products in the past
and  will   likely   continue   to  do  so  in  the   future.   See  "Risks  and
Uncertainties--Short Product Lives and Technological Change."

INTELLECTUAL  PROPERTY
----------------------

ITEC'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.  The Company currently holds no patents.  Computer
and printer  imaging  technology  is a rapidly  changing  business  environment.
Consequently,  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.

PERSONNEL
---------

ITEC employed a total of 93  individuals  worldwide as of June 30, 1999. Of this
number,  30 are  involved  in sales,  marketing,  corporate  administration  and
finance, 55 are in engineering, research and development, and technical support.
Of that number,  ITEC's European  Headquarters  employed 8 individuals.  None of
ITEC's employees are represented by any union.

RISKS AND UNCERTAINTIES
-----------------------

CAPITAL REQUIREMENTS
--------------------

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 June 30, 1999, the Company had accumulated  losses of approximately  $59.1
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,  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.  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


                                      -7-
<PAGE>


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

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

COMPETITIVE INDUSTRY
--------------------

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

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

SHORT PRODUCT LIVES AND TECHNOLOGICAL CHANGE
--------------------------------------------

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

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

DEVELOPING MARKETS AND APPLICATIONS
----------------------------------

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

The  success  of ITEC  products  in the  marketplace  depends  on many  factors,
including  product  performance,   price,  ease  of  use,  support  of  industry
standards,  and customer support and service. There can be no assurance that the
Company will be able to compete  successfully  given these factors.  Competitors
may  develop  products  comparable  or  superior to those of the Company and may
adapt more quickly than ITEC to new technologies,  evolving industry trends, and
customer  requirements.  Therefore,  the Company may have to spend more money to
effectively   compete  for  market   share,   including   funds  to  expand  its




                                      -8-
<PAGE>


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 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


                                      -9-
<PAGE>


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.

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


                                      -10-
<PAGE>


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,  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
original equipment manufacturers ("OEM"),  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)


                                      -11-
<PAGE>


general  conditions in the computer  peripheral market and the markets served by
the Company or in the worldwide economy;  (5) a shortfall in revenue or earnings
from securities  analysts'  expectations;  (6)  announcements  of  technological
innovations or new products or enhancements  by the Company or its  competitors;
(7)  developments  in patents or other  intellectual  property  rights;  and (8)
developments in the Company's relationships with its customers and suppliers.

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

DILUTION OF  STOCKHOLDER  INTERESTS
-----------------------------------

The issuance of the Company's  reserved  shares would dilute the equity interest
of existing  stockholders  and could have a  significant  adverse  effect on the
market  price of ITEC  common  stock.  As of October 11,  1999,  the Company had
41,583,418  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 may not be able to meet the listing maintenance  requirements of the
Nasdaq  SmallCap  Market and Nasdaq rules,  which  require,  among other things,
minimum net  tangible  assets of $2 million,  a minimum bid price for our common
stock of $1.00, and shareholder  approval prior to the issuance of securities in
connection  with a  transaction  involving  the sale or issuance of common stock
equal to 20 percent or more of a company's  outstanding  common stock before the
issuance  for less than the  greater of book or market  value of the stock.  The
Company may not meet these  requirements  in the future as, in the past, we have
not always been in compliance  and are  presently  subject to a six month review
period with  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


                                      -12-
<PAGE>


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 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.

Although  the  Company  has not  procured  a year 2000  upgrade  package  to its
existing business software, 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.  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.  However,  software  drivers are used to modify and direct the output
and  performance  of  these  printers.  While  these  drivers  do  not  generate
time-specific codes, they mirror time codes resident in the applicable operating
system.  In the  event a  modification  is  required  to a  software  driver  to
accommodate year 2000  modifications  instituted by a manufacturer of a software
package,  computer  platform or  operating  system that the Company is currently
supporting, the Company currently plans to update that driver free-of-charge and
make it available to customers for  down-loading  from the internet.

ABSENCE OF DIVIDENDS
--------------------

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


ITEM 2.

PROPERTIES
----------

ITEC owns no real property.  The Company leases approximately 60,000 square feet
of space in a facility located at 15175 Innovation Drive, San Diego,  California
92128, at a monthly lease rate of  approximately  $41,500.  This facility houses
corporate management,  marketing,  sales, engineering,  and support offices. The
lease expires on March 31, 2006.  The Company has the option to extend the lease
for seven additional years.

ITEC's European  headquarters,  ITEC Europe Ltd., currently leases approximately
2,000 square feet in a facility located outside London,  England. The address is
Ritz Plaza House,  Denton Road,  Milbanke Way,  Wokingham,  Berks. This facility
houses sales,  distribution and technical support  personnel.  The monthly lease
rate is U.S.  $2,500  and the  lease  expires  in  September  2000,  and has two
one-year  renewal  options.

ITEM 3.

LEGAL  PROCEEDINGS
------------------

On or about February 2, 1999, American Industries, Inc., Ellison Carl Morgan and
entities  related to Ellison Carl Morgan (the  "Plaintiffs")  served the Company
and certain  officers and  directors of the Company  (the  "Defendants")  with a
lawsuit  filed in the  Circuit  Court of the State of Oregon  for the  County of
Multnomah,  alleging that the Defendants violated certain Oregon Securities Laws
in connection  with the  Plaintiffs'  investments  in the Company,  breached the
contracts  with the  Plaintiffs  and  committed  fraud in  connection  with such
contracts.  In this action,  the plaintiffs are seeking  reimbursement for their
investments and lost profits in an amount to be determined at trial. On or about
February 22, 1999, the Plaintiffs  served  Defendants with an Amended  Complaint
seeking  approximately  $1.3  million for added  allegations  regarding  alleged
breaches of agreements between the Company and American Industries providing the
Company  with  letters  of  credit.  On or  about  September  1,  1999  American
Industries obtained a judgment on the


                                      -13-
<PAGE>


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 had filed an answer to the complaint and the case is
progressing through normal procedures.

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 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------

On May 27,  1999,  and the  adjournments  on June 11,  1999  and  June 25,  1999
thereto, the Company held an Annual Meeting of Stockholders to consider and vote
upon the following proposals:

1.   The election of five persons to serve as directors of the Company until the
     next annual  meeting of  stockholders  and until their  successors are duly
     elected and qualified.

2.   To amend the Company's  certificate of incorporation to increase the number
     of the Company's preferred stock authorized to be issued from 10,000 shares
     to 100,000 shares.

3.   To approve the  Company's  1998 Stock  Option Plan (the "1998 Stock  Option
     Plan"),  pursuant to which 1,500,000  shares of the Company's  common stock
     will be reserved for issuance over the term of the 1998 Stock Option Plan.

4.   To approve the issuance of all shares of Company  common  stock,  which the
     Company would be entitled to issue upon conversion of the Company's  Series
     D Convertible Preferred Stock.

5.   To approve the issuance of all shares of the Company  common  stock,  which
     the Company  would be entitled to issue upon  conversion  of the  Company's
     Series E Convertible Preferred Stock.

6.   To  ratify  the  appointment  of Boros &  Farrington  APC as the  Company's
     independent auditors for the fiscal year ending June 30, 1999.

The proposals were approved based upon the favorable  votes of a majority of the
votes cast for each proposal,  except  Proposal  Number 2, which was approved by
the favorable votes of a majority of the shares eligible to vote at the meeting.

Proxies for the meeting  were  solicited  pursuant to  Regulation  14A under the
Securities  Exchange  Act of 1934,  as  amended.  There was no  solicitation  in
opposition to the management  nominees as listed in the proxy  statement and all
of such nominees were elected.

PART II

ITEM 5.

MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
---------------------------------------------------------------------

The Company's Common Stock is traded in the over-the-counter  market, and quoted
on the Nasdaq SmallCap(R) Market under the symbol: "ITEC."

The following  table sets forth the high and low bid quotations of the Company's
Common Stock for the periods indicated as reported by the Nasdaq SmallCap Market
or the NASD  Electronic  Bulletin  Board.  Prices  shown in the table  represent
inter-dealer  quotations,  without  adjustment for retail markup,  markdown,  or
commission, and do not necessarily represent actual transactions and reflect the
1-for-5 reverse stock split effectuated by the Company on February 24, 1997.


                                      -14-
<PAGE>
                                        High          Low
----------------------------------------------------------
Year ended June 30, 1997
     First quarter                $    11.88  $      7.50
     Second quarter                    10.00         4.69
     Third quarter                      5.94         4.37
     Fourth quarter                     7.13         3.25
Year ended June 30, 1998
     First quarter               $      7.19  $      5.50
     Second quarter                     6.69         4.25
     Third quarter                      4.63         2.75
     Fourth quarter                     4.19         2.25
Year ended June 30, 1999
     First quarter               $      3.63  $      1.75
     Second quarter                     1.88         0.25
     Third quarter                      4.13         0.28
     Fourth quarter                     1.97         0.66

----------------------------------------------------------

The number of record holders,  not including  brokers,  of the Company's  Common
Stock, $.005 par value, was approximately 522 at October 11, 1999.

DIVIDENDS
---------

The Company has never  declared nor paid any cash dividends on its Common Stock.
ITEC  currently  intends  to  retain  earnings,  if any,  after any  payment  of
dividends on its 5%  Convertible  Preferred  Stock,  for use in its business and
therefore,  does not  anticipate  paying any cash dividends on its Common Stock.
Holders of the 5% Convertible  Preferred Stock are entitled to receive, when and
as declared by the Board of Directors, but only out of amounts legally available
for the payment thereof,  cumulative cash dividends at the annual rate of $50.00
per share, payable semi-annually, commencing on October 15, 1986. ITEC has never
declared nor paid any cash  dividends  on the 5%  Convertible  Preferred  Stock.
Dividends in arrears at June 30, 1999 were $518,000.

ITEM 6.

SELECTED FINANCIAL DATA
-----------------------

The  consolidated  statement of operations  data with respect to the years ended
June 30, 1999, 1998 and 1997 and the consolidated balance sheet data at June 30,
1999,  and 1998,  set forth below are derived  from the  consolidated  financial
statements of the Company  included in Item 8 below,  which have been audited by
Boros & Farrington  APC,  independent  accountants.  The  selected  consolidated
financial data set forth (in thousands, except per share data) should be read in
conjunction with  "Management's  Discussion and Analysis of Financial  Condition
and  Results  of  Operations"  contained  in Item 7  below,  and  the  Company's
consolidated  financial  statements  and the notes  thereto  contained in Item 8
below.  Historical  results are not necessarily  indicative of future results of
operations.

Statement of Operations Data:
----------------------------
In thousands (except per share data)
<TABLE>
<CAPTION>
                                                           1999            1998          1997
                                                      ------------    ------------    ---------
<S>                                                   <C>             <C>             <C>
NET REVENUES
     Sales of product                                 $     16,417    $     30,740    $  26,081
     Engineering Fees                                          150           2,327        5,860
     License fees and royalties                                730           1,350          296
                                                        ----------     -----------    ---------
     Net total revenues                                     17,297          34,417       32,237
                                                        ----------     -----------    ---------
COSTS AND EXPENSES
     Cost of products sold                                  14,064          22,536       17,022
     Selling, general, and administrative                   13,707          10,269       10,460
     Cost of engineering and purchased R&D                   2,183           2,475        4,243
     Amortization of capitalized software                    3,951               -            -
     Special charges                                         6,268           8,941            -
                                                        ----------     -----------    ---------
INCOME (LOSS) FROM OPERATIONS                             (22,876)         (9,804)          512
                                                        ----------     -----------    ---------
NET INCOME (LOSS)                                         (25,129)        (10,163)          723
                                                        ==========     ===========    =========
EARNINGS (LOSS) PER COMMON SHARE
     Basic                                              $   (1.62)     $    (0.90)   $     0.07
     Diluted                                            $   (1.62)     $    (0.90)   $     0.06
                                                        ----------     -----------    ---------
</TABLE>


                                      -15-
<PAGE>
Balance Sheet Data:
In thousands
                                                          1999          1998
                                                         -----          ----

     Cash                                           $       75     $   3,023
     Working Capital                                   (16,519)          315
     Total assets                                        7,250        20,961
     Long-term obligations                                   -         1,828
     Preferred stock                                     6,875         2,780
     Total shareholders' equity (deficit)              (12,432)        4,604

ITEM 7.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
-------------------------------------------------

Imaging  Technologies  Corporation  develops,   manufactures,   and  distributes
high-quality digital imaging solutions.  The Company produces a range of printer
and imaging  products for use in graphics and publishing,  digital  photography,
and other niche business and technical markets.  The Company's core technologies
are related to 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 acquired two businesses  during the past two years. The Company has altered
its focus away from some of its traditional  revenue  sources (i.e.  engineering
services and technology licensing) and has been required to make expenditures to
support these  changes.  As of the end of Fiscal 1999,  the  Company's  business
continues  to be in a  significant  transitional  phase and there are  important
short-term  operational  and  liquidity  challenges.  Accordingly,  year-to-year
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  has  been  derived  from
non-recurring engineering fees and royalty income from a relatively small number
of 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 not completed by the customer, were never introduced into
the market and shipped,  or were cancelled by the customer before ITEC completed
its  portion  of the  contract.  The  timing  and  amount of income  from  these
customers has ultimately  depended upon sales levels and shipping  schedules for
the OEM  products  into which the  Company's  products  were  incorporated.  The
Company  has not had  control  over the  shipping  date nor  volumes of products
shipped by its OEM  customers,  and there have been no  assurances  that any OEM
would continue to ship products that incorporate the Company's  technology.  The
Company's  current strategy is to develop and  commercialize its own technology.
The Company intends to increase penetration of its current target markets and to
continue pursuing clearly defined commercial market opportunities that enable it
to leverage  its core  technologies.  The Company  has  established  a number of
strategic  partnerships  with  industry  leaders,  such as Adobe Systems and NEC
Electronics  for  product  development,   marketing  and  sales.  Through  these
strategic  partnerships,  ITEC seeks to obtain  specific  market  knowledge  and
enhanced  understanding  of market  demands  and needs,  access to  funding  for
continued product development, product and customer validation and a channel for
market penetration.  Due to these strategic changes,  the Company has elected to
charge off approximately  $3.95 million in capitalized  software costs in fiscal
1999.

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. To address the Company's working
capital  needs,  in  September  1998,  the Company  raised an aggregate of $4.38
million  through  the  issuance of shares of its Common  Stock and  subordinated
notes to several  private  investors;  and,  in the spring of 1999,  the Company
issued  shares of Series D and Series E preferred  stock and raised an aggregate
of $5.3 million, and retired $2.4 million of outstanding debt.

Nevertheless,  the  Company's  needs to raise  additional  funds to operate  its
business effectively.  The Company has engaged financial advisors to assist with
additional  fund  raising  efforts and the  Company  intends to attempt to raise
additional funds in the near future.  There can be no assurance,  however,  that
the Company will be able to 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


                                      -16-
<PAGE>


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 "Item
1. Business--Risks and Uncertainties--Future Capital Needs."

Restructuring and New Business Units
------------------------------------

In fiscal  1999,  the  Company  began  implementation  of a plan to realign  its
management  and  create a  divisional  structure  within the  organization.  The
Company  consolidated  all of its  independent  operating  subsidiaries  under a
single financial and operational structure in order to improve the effectiveness
of its established sales channels and to enhance cross-selling opportunities. In
addition  to the  structural  realignment,  ITEC  closed its 27,000  square-foot
printer manufacturing and distribution facility in Costa Mesa,  California,  and
relocated  those  operations  to the  Company's  headquarters  facilities in San
Diego.  The Company also  relocated its marketing  and sales  activities.  While
these  efforts  have  contributed  some  savings  due to  workforce  reductions,
decreased  space,  and  elimination  of  redundant  operations,  the Company has
reported  restructuring  charges of approximately $3 million for fiscal 1999. In
addition,  the Company charged off approximately $1.1 million in connection with
the disposal of its memory products businesses.

The Company's 1998 restructuring plan to streamline  operations and reduce costs
resulted in a net charge of  approximately  $3.8 million  including $1.7 million
relating  to  redundant   compensation  costs,  $1.5  million  relating  to  the
write-down of inventory,  licenses, and other assets that are not central to the
Company's  core  business,  and $0.3 million  relating to the  consolidation  of
facilities.

During  fiscal 1999,  the Company  launched an  E-commerce  web site designed to
offer computer and imaging hardware, software, and consumables.  DealSeekers.com
is an interactive  internet catalog showroom featuring thousands of computer and
digital imaging products.

The Company's board of directors  approved a private placement for investment in
DealSeekers.com  and  formed a  dedicated  Board of  Directors  to  oversee  the
continued  development  of the  business.  Management  continues to  investigate
additional  funding,  including the  possibility of an initial  public  offering
during 2000.

Also during fiscal 1999, ITEC launched an additional web site,  Color.com,  as a
resource  center to provide  information on the highest  quality  correct color.
This new site allows  consumers to purchase ITEC products  including  ColorBlind
Software.

Acquisition and Sale of Business Units
--------------------------------------

In fiscal 1999, the Company made several strategic acquisitions to reinforce its
technology  position and expand sales  channels.  ITEC purchased  privately-held
McMican  Corporation  to  operate  as the  Storage  Products  Division  of ITEC,
producing specialized memory modules.  However,  during fiscal 1999, the Company
sold its memory business operations, which consisted of McMican Memory and Prima
International,  a  distributor  of  memory  modules  that was  acquired  by PCPI
Technologies in fiscal 1993.  Included in the restructuring  charges reported by
the  Company was  approximately  $1.1  million  related to the McMican and Prima
operations.

In fiscal 1999 ITEC merged with Color  Solutions,  Inc., a software  development
firm. Color Solutions'  ColorBlind  software allows users to accurately  profile
peripherals  such as scanners,  monitors,  digital  cameras,  printers and other
specialized  color digital devices,  all based on  internationally-accepted  ICC
color standards.

Also in fiscal 1998,  ITEC  acquired  the assets of AMT, the European  sales and
distribution  subsidiary  of  Singapore-based  Lam Soon, a  manufacturer  of dot
matrix,  inkjet and  specialized  laser  printers.  AMT had been  ITEC's  master
stocking  distributor  of  printers  and  supplies  in  Europe.  AMT's  European
operations  have being  integrated  into ITEC's  recently  established  European
Headquarters operation, ITEC Europe, located near London.

Special and Restructuring Charges
---------------------------------

In fiscal  1998,  the Company  wrote-off  contract  and license  receivables  of
approximately  $5.2 million that were due from OEM customers  and  co-developers
who have been adversely  affected by the downturn in the  technology  segment of
the market and the economic  crisis in Asia. In fiscal 1999, the Company charged
off $2.2 million in uncollectable receivables.  This condition was caused by the
Company's  need to accept orders from customers with higher credit risk in order
to replace lost  distribution  channels  due to the  Company's  working  capital
deficiencies.

Additionally,  due to its working capital shortage,  the Company wrote-off costs
associated with developed products that could not be deployed.


                                      -17-
<PAGE>


RESULTS OF OPERATIONS
---------------------

Net Revenues
------------

Revenues were $17.3  million,  $34.4  million,  and $32.2 million for the fiscal
years ended June 30, 1999,  1998 and 1997,  respectively.  Sales of product were
$16.4 million,  $30.7 million, $26.1 million for the fiscal years ended June 30,
1999, 1998 and 1997, respectively.  The decrease in product sales in fiscal 1999
from 1998 was due primarily to the sale and discontinuation of operations of the
Company's memory products  business units,  which had contributed  approximately
$12 million in revenues in prior fiscal  years.  The  increase in product  sales
from 1997 to 1998 was due primarily to an increase in sales of printer products,
especially  those  associated with the Company's  merger with NewGen,  in fiscal
1997.  Engineering  fees were $150,000,  $2.3 million,  and $5.9 million for the
fiscal years ended June 30, 1999, 1998 and 1997,  respectively.  The decrease in
fiscal 1999  compared to fiscal 1998 and the  decrease in 1998  compared to 1997
was primarily the result of the Company's ongoing change in strategic direction,
focusing more on internal product  development and sales and less on engineering
for third  parties.  License  fees and  royalties  also  decreased  due to these
changes in strategic business practice.  They were $730,000,  $1.4 million,  and
$.3  million  for  the  fiscal  years  ended  June  30,  1999,  1998  and  1997,
respectively.  The  increase in license fees and  royalties  from fiscal 1997 to
fiscal 1998 was due primarily to the sales of a license to AMT of $1.3 million.

Cost of Products Sold
---------------------

Cost of products sold were $14.1  million or 86% of sales,  $22.5 million or 73%
of product sales, and $17.0 million or 65% of product sales for the fiscal years
ended June 30,  1999,  1998 and 1997,  respectively.  The  relative  increase in
fiscal 1999 as compared to fiscal 1998 is attributable to competitive  pressures
to reduce selling prices on the Company's end-of-life products.  The increase in
1998 as compared to 1997 was primarily due to price  reductions on older printer
products and increased sales of lower margin memory products.

Selling, General, and Administrative Expenses
---------------------------------------------

Selling,  general and administrative expenses were $13.7 million or 79% of total
revenues,  $10.3 million or 30% of total  revenues,  and $10.5 million or 32% of
total  revenues  for the  fiscal  years  ended  June 30,  1999,  1998 and  1997,
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,  advertising,  and other marketing related expenses. The increase in
fiscal 1999 as compared to fiscal 1998 is attributable primarily to increases in
marketing  costs   associated  with  the  Company's   increased   product  sales
activities. The Company also had a substantial increase in fees for professional
services,  including legal fees and interest costs of  approximately $2 million.
Selling, general, and administrative costs in the previous two fiscal years were
relatively similar.

Cost of Engineering and Purchased R&D
-------------------------------------

Cost of  engineering  and purchased R&D was $2.2 million or 1455% of engineering
revenues,  $2.5 million or 106% of engineering revenues, and $4.2 million or 72%
of engineering revenues for the fiscal years ended June 30, 1999, 1998 and 1997,
respectively.  The changes relate primarily to the change in corporate  strategy
from a focus on  engineering  fees and royalties to that of product  sales.  The
Company's engineering resources were refocused during fiscal 1998 on proprietary
product  development rather than contract  engineering.  New products from these
activities  are expected to being  shipping to  customers  in fiscal  2000.  The
increase  as a  percentage  of  engineering  revenues  in fiscal  1998 over 1997
results from cost overruns on contracts that were terminated.

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.

In August  1997,  the  Company  completed a private  placement  of 500 shares of
Series C  Convertible  Preferred  Stock  providing  aggregate  proceeds  of $5.0
million.  A portion of the shares were converted by the holders and on September
18,  1998,  the  Company  redeemed  all 237  outstanding  shares of the Series C
Convertible Preferred Stock. The Company paid $2.23 million in cash, issued $1.0
million in subordinated promissory notes and warrants to purchase 300,000 shares
of Common Stock to the holders of the Series C  Convertible  Preferred  Stock in
connection with the redemption.

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.


                                      -18-
<PAGE>


As of June 30, 1999, the Company had negative  working capital of  approximately
$16.5  million a decrease of  approximately  $17 million as compared to June 30,
1998.  The decrease is primarily due the ongoing  restructuring  of the Company,
including  charges for discontinued  operations,  charge-offs of receivables and
Inventory,  and  other  costs  associated  with  the  changes  in the  Company's
strategic direction.

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.

Net cash used in  operating  activities  was $7.1  million  during  fiscal 1999,
approximately  equivalent  to net cash used during the year ended June 30, 1998.
Net cash used in operating  activities  was $4.0  million  during the year ended
June 30, 1997.  The increase  from 1998 as compared to 1997  resulted  primarily
from the operating loss and special charges.

Net cash used in investing  activities  decreased to $3.4 million  during fiscal
1999 from $3.8 million during the year ended June 30, 1998;  and, in fiscal 1998
had  increased  from $2.2  million  during the years  ended June 30,  1997.  The
decrease  as  compared  to  1998  is  primarily  attributable  to the  Company's
investment in capitalized  software.  The increase from 1998 as compared to 1997
resulted primarily from changes in capitalized software.

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 June 30,
1999, was approximately $518,000.

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.

To address the Company's  working  capital  needs,  on September  17, 1998,  the
Company  raised an aggregate of $4.38 million  through the issuance of shares of
its Common Stock and subordinated notes to several private investors.

In January 1999, the Company  completed a private placement of 1,200 units, each
unit  consisting of one share of series D convertible  preferred stock and 2,000
warrants  exercisable  into shares of the Company's  common  stock.  The Company
raised $1.8  million,  less fees and expenses  incurred in  connection  with the
private placement.

In February 1999, the Company completed a private placement of 1,250 units, each
unit consisting of one share of series E preferred stock and 5,000 warrants into
shares of common stock. The terms of the series E preferred stock were identical
to the terms of the series D preferred  stock.  In connection  with this private
placement,  the Company  raised  $3.7  million in cash and retired $1 million of
debt, which was exchanged for series E preferred stock.

While these  financings  have served to improve the  Company's  working  capital
position,  the Company needs to raise  additional  funds to operate its business
effectively.  The  Company  has  engaged a  financial  advisor  to  assist  with
additional  fund  raising  efforts and the  Company  intends to attempt to raise
additional funds in the near future.  There can be no assurance,  however,  that
the Company will be able to 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


                                      -19-
<PAGE>


planned  activities.  The Company's  inability to fund its capital  requirements
would  have  a  material   adverse   effect  on  the   Company.   See  "Item  1.
Business--Risks and Uncertainties--Future Capital Needs."

ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
----------------------------------------------------------

Not applicable.


                                      -20-
<PAGE>


ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------

Index to Consolidated Financial Statements
------------------------------------------
                                                                         Page

Report of independent accountants                                        22
Consolidated balance sheets as of June 30, 1999 and 1998                 23
Consolidated statements of operations for the years ended
     June 30, 1999, 1998, and 1997                                       24
Consolidated statements of shareholders' equity for the years ended
     June 30, 1999, 1998, and 1997                                       25
Consolidated statements of cash flows for the years ended
     June 30, 1999, 1998, and 1997                                       26
Notes to consolidated financial statements                               27


                                      -21-
<PAGE>


REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------

To the Board of Directors and Shareholders of Imaging Technologies Corporation

We  have  audited  the  consolidated  balance  sheets  of  Imaging  Technologies
Corporation  and its  subsidiaries  as of June 30, 1999 and 1998 and the related
consolidated statements of operations,  shareholders' equity, and cash flows for
each of the three  years in the period  ended  June 30,  1999.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits  provide a reasonable  basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Imaging
Technologies  Corporation and its subsidiaries as of June 30, 1999 and 1998, and
the results of their operations and their cash flows for each of the three years
in the  period  ended  June  30,  1999 in  conformity  with  generally  accepted
accounting principles.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company will continue as a going  concern.  Note 1 to the  financial  statements
describes  various  factors  that raise  substantial  doubt about its ability to
continue as a going concern.  Management's  plans in regard to these matters are
also  described  in  Note  1.  The  financial  statements  do  not  include  any
adjustments that might result from the outcome of this uncertainty.

/s/ BOROS & FARRINGTON APC
-----------------------------
    BOROS & FARRINGTON APC
San Diego, California
October 11, 1999


                                      -22-
<PAGE>


                IMAGING TECHNOLOGIES CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

                             JUNE 30, 1999 AND 1998
                        (in thousands, except share data)

                                     ASSETS

                                                       1999           1998
                                                    ---------      ---------
Current assets
     Cash                                           $      75      $   3,023
     Accounts receivable                                1,959          4,133
     Inventories                                          552          6,287
     Prepaid expenses and other                           577          1,401
                                                    ---------       --------
          Total current assets                          3,163         14,844

Property and equipment, net                               986          1,525
Capitalized software, net                               2,851          3,655
Other                                                     250            937
                                                    ---------       --------
                                                    $   7,250      $  20,961


                      LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities

     Borrowings under bank note payable             $   6,469      $   5,203
     Short-term debt                                    5,010          1,998
     Current portion of long-term debt                      -            903
     Accounts payable                                   5,532          5,027
     Accrued expenses                                   2,671          1,398
                                                    ---------       --------

          Total current liabilities                    19,682         14,529

Long-term debt, less current portion                        -          1,828
                                                    ---------       --------
          Total liabilities                            19,682         16,357
                                                    ---------       --------
Commitments and contingencies (Note 11)
Stockholders' equity (deficit)
  Series A preferred stock, $1,000 par value,
     7,500 shares authorized, 420.5 shares
     issued and outstanding                               420            420
  Series C preferred stock, $1,000 par value,
     1,200 shares authorized, 236 shares issued
     and outstanding                                        -          2,360
  Series D preferred stock, $2,000 stated value,
     1,200 shares authorized, 900 shares issued
     and outstanding                                    1,800              -
  Series E preferred stock, $5,000 stated value,
     1,250 shares authorized, 931 shares issued
     and outstanding                                    4,655              -
  Common stock, $0.005 par value, 100,000,000 shares
     Authorized; 21,946,216 shares issued and
     outstanding                                          110             62
  Paid-in capital                                      39,804         35,859
  Shareholder loans                                      (105)          (110)
  Accumulated deficit                                 (59,116)       (33,987)
                                                      -------        -------
       Total shareholders' equity (deficit)           (12,432)         4,604
                                                      -------        -------
                                                     $  7,250       $ 20,961
                                                      =======        =======

                 See Notes to Consolidated Financial Statements.


                                      -23-
<PAGE>


                IMAGING TECHNOLOGIES CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS

                    YEARS ENDED JUNE 30, 1999, 1998, AND 1997
                        (in thousands, except share data)


<TABLE>
<CAPTION>

                                                                      1999           1998         1997
                                                                      ----           -----        ----
<S>                                                               <C>            <C>            <C>
Revenues
     Sales of products                                            $    16,417    $    30,740    $  26,081
     Engineering fees                                                     150          2,327        5,860
     Licenses and royalties                                               730          1,350          296
                                                                   ----------     ----------   ----------
                                                                       17,297         34,417       32,237
                                                                   ----------     ----------   ----------
Costs and expenses
     Cost of products sold                                             14,064         22,536       17,022
     Selling, general, and administrative                              13,707         10,269       10,460
     Cost of engineering fees, research, and development                2,183          2,475        4,243
     Amortization of capitalized software costs                         3,951              -            -
     Special charges
        Charge for uncollectable receivables                            2,233          5,157            -
        Disposal of subsidiaries                                        1,087              -            -
        Restructuring costs                                             2,948          3,784            -
                                                                   ----------     ----------   ----------
                                                                       40,173         44,221       31,725
                                                                   ----------     ----------   ----------
Income (loss) from operations                                        (22,876)        (9,804)          512
                                                                   ----------     ----------   ----------
Other income (expense):
     Interest, net                                                    (1,989)          (341)         (87)
                                                                   ----------     ----------   ----------
     Other                                                                  -              -           64
                                                                   ----------     ----------   ----------
                                                                      (1,989)          (341)         (23)
                                                                   ----------     ----------   ----------
Income (loss) before income taxes                                    (24,865)       (10,145)          489
Income tax benefit (expense)                                            (264)           (18)          234
                                                                   ----------    -----------   ----------
Net income (loss)                                                 $  (25,129)    $  (10,163)  $       723
                                                                   ==========     ==========   ==========
Earnings (loss) per common share
     Basic                                                        $    (1.62)    $    (0.90)  $      0.07
                                                                   ==========     ==========   ==========
     Diluted                                                      $    (1.62)    $    (0.90)  $      0.06
                                                                   ==========     ==========   ==========
Weighted average common shares                                         15,498         11,295        8,698
                                                                   ==========     ==========   ==========
Weighted average common shares - assuming dilution                     15,498         11,295       10,623
                                                                   ==========     ==========   ==========

</TABLE>

                 See Notes to Consolidated Financial Statements.


                                      -24-
<PAGE>


                IMAGING TECHNOLOGIES CORPORATION AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                    YEARS ENDED JUNE 30, 1999, 1998, AND 1997
                        (in thousands, except share data)

<TABLE>
<CAPTION>

                                  Series A  Series B  Series C  Series D  Series E
                                  Preferred Preferred Preferred Preferred Preferred Common Paid-In            Accum
                                     Stock    Stock     Stock     Stock     Stock   Stock  Capital    Loans   Deficit      Total
                                   -------- --------    ------    -----    ------    ----- -------    -----   -------      ------
<S>                               <C>        <C>      <C>       <C>       <C>       <C>    <C>        <C>     <C>          <C>
Balance, July 1, 1996             $ 2,318   $ 1,162   $     -    $   -   $     -       38  $25,009  $    (8)   (24,547)   $ 3,972
Issuance of common stock
  Conversion of preferred stock
     (556,601 shares)              (1,898)   (1,162)        -        -         -        3    3,056        -          -         (1)
  Business combinations
     (2,150,000 shares)                 -         -         -        -         -       11    2,547      (82)         -      2,476
  Exercise of options and warrants
     (162,993 shares)                   -         -         -        -         -        1      256      (50)         -        207
Private Sale
     (100,000 shares)                   -         -         -        -         -        -      500        -          -        500
Net income                              -         -         -        -         -        -        -        -        723        723
                                   ------    ------    ------    -----    ------    -----   ------    -----    -------    --------
Balance, June 30, 1997                420         -         -        -         -       53   31,368     (140)   (23,824)     7,877
Issuance of preferred stock
     (500 shares)                       -         -     5,000        -         -        -     (211)       -          -      4,789
Issuance of common stock
  Conversion of preferred stock
     (958,598 shares)                   -         -    (2,640)       -         -        5    2,617        -          -        (18)
  Conversion of note payable
     (64,516 shares)                    -         -         -        -         -        -      100        -          -        100
  Business acquisitions
     (240,000 shares)                   -         -         -        -         -        1      349        -          -        350
  Exercise of options and warrants
     (554,530 shares)                   -         -         -        -         -        3    1,636      (53)         -      1,586
Collection of shareholder loans         -         -         -        -         -        -        -       83                    83
Net loss                                -         -         -        -         -        -        -             (10,163)   (10,163)
                                   ------    ------    ------    -----    ------    -----   ------    -----    -------    --------
Balance, June 30, 1998                420         -     2,360        -         -       62   35,859     (110)   (33,987)     4,604
Redemption of preferred stock           -         -    (2,360)       -         -        -     (870)       -          -     (3,230)
Issuance of preferred stock
    (900 shares)                        -         -         -    1,800         -        -        -        -          -      1,800
 Issuance of preferred stock
    (931 shares)                        -         -         -        -     4,655        -        -        -          -      4,655
Issuance of common stock
  Cash (4,105,800)                      -         -         -        -         -       21    1,922        -          -      1,943
  Services (3,167,500 shares)           -         -         -        -         -       16    1,854        -          -      1,870
  Conversion of note payable
     (2,000,000 shares)                 -         -         -        -         -       10      940        -          -        950
  Exercise of options and warrants
     (270,660 shares)                   -         -         -        -         -        1      269        -          -        270
Stock issuance costs                    -         -         -        -         -        -     (170)       -          -       (170)
Collection of shareholder loans         -         -         -        -         -        -        -        5          -          5
Net loss                                -         -         -        -         -        -        -        -    (25,129)   (25,129)
                                   ------    ------    ------    -----    ------    -----   ------    -----    -------    --------
Balance, June 30, 1999            $   420   $     -   $     -   $1,800   $ 4,655   $  110  $39,804   $ (105)  $(59,116)  $(12,432)
                                   ======    ======    ======    =====    ======    =====   ======    ======   =======    ========
</TABLE>

                 See Notes to Consolidated Financial Statements.


                                      -25-


<PAGE>


                IMAGING TECHNOLOGIES CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                    YEARS ENDED JUNE 30, 1999, 1998, AND 1997
                        (in thousands, except share data)

<TABLE>
<CAPTION>
                                                                   1999           1998              1997
                                                                   ----           ----              ----
<S>                                                             <C>               <C>               <C>
Cash flows from operating activities
   Net income (loss)                                            $(25,129)     $ (10,163)           $  723
   Adjustments to reconcile net income (loss) to net
     cash from operating activities
        Non-cash special charges                                   3,440          7,073                 -
        Depreciation and amortization                                761            657               909
         Amortization of capitalized software                      3,951              -                 -
         Stock issued for services                                 1,870              -                 -
         Provision for income taxes                                  250              -                 -
        Changes in operating assets and liabilities
           Accounts receivable                                       (59)          (973)           (3,893)
           Inventories                                             5,197         (3,263)             (202)
           Prepaid expenses and other                                626           (413)               61
           Accounts payable and accrued expenses                   2,043            338            (1,602)
           Deferred revenue                                            -           (356)              (32)
                                                                 -------        -------       -----------

               Net cash from operating activities                 (7,050)        (7,100)           (4,036)
                                                                 -------        -------       -----------
Cash flows from investing activities
   Prepaid licenses                                                  (34)          (274)             (641)
   Capitalized software                                           (3,147)        (3,106)             (526)
   Capital expenditures                                             (222)          (413)           (1,009)
   Other                                                               -              -               (36)
                                                                 -------        -------       -----------
      Net cash from investing activities                          (3,403)        (3,793)           (2,212)
                                                                 -------        -------       -----------
Cash flows from financing activities
   Capital contributions (NewGen)                                      -              -             1,002
   Cash acquired from business acquisitions                            -             40                 -
   Net borrowings under bank notes payable                        (1,234)         6,415               340
   Issuance of other notes payable                                 5,860          1,000               143
   Net proceeds from issuance of common stock                      2,213          1,586               707
   Net proceeds from issuance of preferred stock                   5,190          5,000                 -
   Stock issuance costs                                            (170)           (229)                -
   Redemption of preferred stock                                 (3,230)              -                 -
   Collection of shareholder loans                                    5              83                 -
   Repayment of notes payable                                    (1,129)           (234)              (83)
                                                                -------         -------       -----------
       Net cash from financing activities                         7,505          13,661             2,109
                                                                -------         -------       -----------
Net increase (decrease) in cash                                  (2,948)          2,768            (4,139)
Cash, beginning of year                                           3,023             255             4,394
                                                                -------         -------       -----------
Cash, end of year                                              $     75        $  3,023      $        255
                                                                =======         =======       ===========
</TABLE>

                 See Notes to Consolidated Financial Statements.


                                      -26-


<PAGE>


                IMAGING TECHNOLOGIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
           (Dollar amounts expressed in thousands, except share data)


Note 1. Operations and Significant Accounting Policies
------------------------------------------------------

Operations
----------

Imaging Technologies  Corporation,  formerly Personal Computer Products, Inc., a
Delaware corporation, and its subsidiaries ("ITEC" or the "Company") (1) develop
and license laser printer  technology;  (2) manufacture,  market, and distribute
laser  printer   controllers   and   accessories;   (3)  market  and  distribute
internationally  a variety of  personal  computer  accessory  products;  and (4)
market  and  distribute  high  resolution  imaging  and color  digital  proofing
products.

Accounting Principles
---------------------

The financial  statements and accompanying notes are prepared in accordance with
generally accepted accounting principles.

Principles of Consolidation
---------------------------

The  financial  statements  include the  accounts of ITEC and its  subsidiaries.
Significant intercompany transactions and balances have been eliminated.

Going Concern Considerations
----------------------------

The  accompanying  financial  statements  have been  prepared  assuming that the
Company will  continue as a going  concern.  At June 30, 1999,  and for the year
then  ended,  the  Company  experienced  a net loss of $25  million and it has a
working  capital  deficiency  of $16.5  million and a net capital  deficiency of
$12.4 million which raise  substantial  doubt about its ability to continue as a
going  concern.  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.

Accounting  Estimates
---------------------

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of assets  and  liabilities  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the  reported  amounts of revenues  and expenses  during the  reporting  period.
Actual results may differ from those estimates.

Inventories
-----------

Inventories are valued at the lower of cost or market;  cost being determined by
the first-in, first-out method.

Property and Equipment
----------------------

Property  and   equipment   are  recorded  at  cost.   Depreciation,   including
amortization of assets recorded under capitalized  leases, is generally computed
on a straight-line  basis over the estimated useful lives of assets ranging from
three to seven years.  Amortization  of leasehold  improvements is provided over
the initial term of the lease, on a straight-line basis.  Maintenance,  repairs,
and minor renewals and betterments are charged to expense.

Revenue Recognition
-------------------

Revenue is recognized when earned.  The Company's revenue  recognition  policies
are in compliance with all applicable accounting regulations, including American
Institute of Certified Public  Accountants  (AICPA)  Statement of Position (SOP)
97-2, Software Revenue Recognition, and SOP 98-9, Modification of SOP 97-2, With
Respect to Certain  Transactions.  Revenue  from  products  licensed to original
equipment  manufacturers  is recorded  when OEMs ship  licensed  products  while
revenue from  certain  license  programs is recorded  when the software has been
delivered and the customer is invoiced. Revenue from packaged



                                      -27-
<PAGE>


product sales to and through distributors and resellers is recorded when related
products are shipped. Maintenance and subscription revenue is recognized ratably
over the contract period.  When the revenue  recognition  criteria  required for
distributor  and reseller  arrangements  are not met,  revenue is  recognized as
payments  are  received.  Provisions  are  recorded  for  returns and bad debts.

Contract  revenues,  including  the  guaranteed  portion  of license  fees,  are
recognized  based  on  the  percentage-of-completion  method,  measured  by  the
percentage of costs incurred to date to estimated total costs for each contract.
Upon cancellation or termination of a contract, the OEM is billed for the entire
guaranteed amount of contract  revenue,  and a provision for loss is established
based on management's  estimate of collectability.  The Company provides for any
anticipated  losses on such  contracts  in the period in which  such  losses are
first determinable.  Unbilled receivables arise when the revenue recognized on a
contract exceeds billing due to timing differences related to billing milestones
as specified in the contracts. Deferred revenue represents billings in excess of
costs and earned  revenues  on such  contracts.

Advertising Costs
------------------

The Company expenses advertising and promotion costs as incurred.  During fiscal
1999,  1998 and 1997, the Company  incurred  advertising  and promotion costs of
approximately  $1,440,  $660, and $1,056  thousand,  respectively.

Research and Development
------------------------

Research and development costs are charged to expense as incurred.
------------------------------------------------------------------

Capitalized Software and Development Costs
------------------------------------------

The Company has developed software technology and capitalized certain qualifying
costs pursuant to the provisions of Statement of Financial  Accounting Standards
No. 86  "Accounting  for  Costs of  Computer  Software  to be Sold,  Leased,  or
Otherwise Marketed".  Costs incurred prior to the establishment of technological
feasibility,  or  subsequent  to the  release  to  customers,  are  expensed  as
incurred. Capitalized software costs are amortized on a straight-line basis over
the estimated economic life of the product,  generally three years. Amortization
begins when the product is available for general release to customers. While the
Company  believes its products will be accepted in the  marketplace  and that it
will recover its investment in capitalized software, the ultimate realization of
this investment is dependent on such acceptance and the abilities of the Company
and/or OEM's to successfully market these new products.

Reverse Stock Split
-------------------

Effective February 24, 1997, the Company effected a 1 for 5 reverse stock split.
Accordingly,  all historical share and per share data have been restated to give
effect for the reverse stock split.

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. The following is
a reconciliation of Basic EPS to Diluted EPS:
<TABLE>
<CAPTION>

                                                    Earnings (loss)           Shares         Per-Share
                                                      (Numerator)         (Denominator)       Amount
                                                    ---------------        -----------       ---------
<S>                                                  <C>                   <C>               <C>
June 30, 1997

       Net income                                    $       723
            Preferred dividends                             (126)
                                                      -----------
       Basic EPS                                             597             8,698          $   0.07
            Effect of options and warrants                     -             1,837
            Effect of convertible notes payable                7                64
            Effect of convertible preferred stock             68                24
                                                     -----------           -------           -------
       Diluted EPS                                   $       672            10,623          $   0.06
                                                     ===========           =======           =======
June 30, 1998
       Net loss                                      $   (10,163)
            Preferred dividends                              (21)
                                                     ------------          -------           --------
       Basic and diluted EPS                         $   (10,184)           11,295          $  (0.90)
</TABLE>


                                      -28-
<PAGE>

<TABLE>
<CAPTION>

                                                    Earnings (loss)         Shares            Per-Share
                                                      (Numerator)        (Denominator)         Amount
                                                    ---------------       -----------         ---------
<S>                                                  <C>                  <C>                 <C>
June 30, 1999
       Net loss                                      $   (25,129)
            Preferred dividends                              (21)
                                                     ------------
       Basic and diluted EPS                         $   (25,150)           15,498          $  (1.62)
                                                     ============           ======           ========
</TABLE>

Stock Issuance Costs
--------------------

Stock  issuance  costs   including   distribution   fees,  due  diligence  fees,
wholesaling  costs,  legal and  accounting  fees,  and printing are  capitalized
before the sale of the related  stock and then charged  against  gross  proceeds
when the stock is sold.

Debt Issuance Costs
-------------------

Debt issuance costs are capitalized  and  amortization is provided over the life
of the related debt using the straight-line method.

Stock-Based Compensation
------------------------

In accordance with the provisions of Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based  Compensation (FAS 123"), which the Company
adopted in fiscal 1997, the Company has elected to follow Accounting  Principles
Board Opinion No. 25,  "Accounting for Stock Issued to Employees" ("APB 25") and
related interpretations in accounting for its employee stock option plans. Under
APB 25, if the exercise price of the Company's  employee stock options equals or
exceeds  the  fair  value of the  underlying  stock  on the  date of  grant,  no
compensation  is  recognized.  Information  regarding  the  Company's  pro forma
disclosure of stock-based  compensation pursuant to FAS 123 may be found in Note
8.

Income Taxes
------------

The Company recognizes a liability or asset for the deferred tax consequences of
temporary  differences  between the tax bases of assets or liabilities and their
reported amounts in the financial  statements.  These temporary differences will
result in  taxable or  deductible  amounts  in future  years  when the  reported
amounts of the assets or liabilities are recovered or settled.  The deferred tax
assets are reviewed for recoverability and valuation allowances are provided, as
necessary.

Fair Value of Financial Instruments
-----------------------------------

Statement of Financial  Accounting  Standards  No. 107  "Disclosures  about Fair
Value  of  Financial   Instruments"   requires  the  disclosure  of  fair  value
information  about  financial  instruments,  whether  or not  recognized  in the
balance sheet,  for which it is practicable to estimate that value. The carrying
value of the  financial  instruments  on the  consolidated  balance  sheets  are
considered reasonable estimates of the fair value.

Reclassifications
-----------------

Certain prior year financial statement classifications have been reclassified to
conform with the current year's presentation.

Note 2. Special Charges
-----------------------

Charge for Uncollectible Receivables
------------------------------------

In fiscal  1999,  the Company  took a charge for  uncollectible  receivables  of
$2,233  thousand.  The charge results  primarily  because  certain  distribution
channels have been closed to the Company due to its poor financial condition and
the Company has assumed higher credit risks.  In addition,  management  believes
that the  appointment of the  operational  receiver has had a negative impact on
the  Company's  ability to collect  its  receivables.

In the fourth quarter of fiscal 1998, the Company wrote-off contract and license
receivables of $5,157 thousand that are due from OEMs and co-developers who have
been adversely  affected by the downturn in the technology segment of the market
and the economic crisis in Asia. The following  summarizes the nature and effect
of these write-offs.

AMT  ACCEL  UK,  LTD.  AMT is a  European  sales  subsidiary  formerly  owned by
Singapore-based Lam Soon,  manufacturer of dot matrix,  laser and inkjet printer
and plotters for specialized application,  printer manufacturer headquartered in
Singapore.  The Company sold to AMT an exclusive  license to  distribute  in the
United  Kingdom and Europe  certain  Company  products in return for  guaranteed
payments  of  $1.25  million.  AMT and its  parent  company  began  experiencing
financial  difficulties and were unable to meet their obligations to the Company
under the licensing  agreement.  Effective May 31, 1998,  the Company  reached a
settlement  with the parent  whereby the Company  acquired the net assets of AMT
totaling $359 thousand and released AMT's parent from its contract  obligations,
resulting in a write-off of $891 thousand.



                                      -29-
<PAGE>


Software  Technology,  Inc. STI is a Korean  corporation  who  manufactures  and
distributes  computer  related  products  in Asia.  STI has been a  longstanding
customer of the  Company and has acted as  co-developer  and  representative  on
various projects. STI owes the Company $954 thousand, but it is unable to pay at
this  time due to the  sharp  decline  in the  Korean  economy,  which has had a
significant  adverse  impact on its  operations  and financial  condition.  As a
result, the Company wrote-off in the fourth quarter the amounts due from STI.

Mita  Digital  Design,  Inc.  and Nippo Ltd.  The Company  developed  for Mita a
controller board that was to be used by Mita in a new  multifunctional  product.
Mita has refused to pay amounts  totaling  $954  thousand  under the  agreement.
According to a recent press  release,  Mita's parent  company in Japan has filed
for protection under bankruptcy  laws. Based on this  announcement,  the Company
believes that Mita does not currently have sufficient  resources to complete and
market  the  new  product  and  is  therefor   seeking  to  avoid  its  contract
obligations. The company has entered into a settlement agreement with Mita which
the  Company  currently  values at $328  thousand.  As a result,  the  remaining
balance  of $626 was  written-off  in the  fourth  quarter.  Nippo is a Japanese
corporation  who acted as a  co-developer  on the Mita project in exchange for a
share of product royalties and distribution  rights. Nippo owes the Company $964
thousand under the co-development  agreement,  but it has refused to pay and has
abandoned  the laser  printer  business  altogether.  As a result,  the  Company
wrote-off the receivable in the fourth quarter.

Minolta  Company  Ltd.  The  Company  had a contract  with  Minolta,  a Japanese
corporation,  to develop a controller  for a color laser  printer  product to be
manufactured  and  sold by  Minolta.  Minolta  terminated  the  contract  and is
disputing  contract  receivables of $260 thousand.  In the fourth  quarter,  the
Company wrote-off the amount due from Minolta.

Tohoku Ricoh Co., Ltd. Tohoku Ricoh is a Japanese  corporation that entered into
a technology  development  agreement  with the Company  providing for guaranteed
payments of $674  thousand.  Tohoku  Ricoh has  cancelled  the  contract  and is
disputing the amount of the guarantee.  The Company believes that it is owed the
full guaranteed contract amount and is pursuing collection. However, as a result
of this dispute, the Company wrote-off in the fourth quarter the amount due from
Tohoku Ricoh.

Other  Contract  Receivables.  In the  fourth  quarter,  the  Company  wrote-off
additional  contract  receivables  totaling  $788  thousand  that are past  due.

Restructuring of Operations
---------------------------

In  fiscal  1999,  the  Company  incurred  additional  charges  relating  to its
restructuring  plan including  $1,367 thousand  relating to personnel  reduction
costs,  $1,207 thousand relating to the write-down of inventory,  licenses,  and
other  assets  that are not central to the  Company's  core  business;  and $374
thousand relating to the consolidation of facilities.

In the  fourth  quarter  of  fiscal  1998,  the  Company  began to  implement  a
restructuring  plan aimed at  streamlining  operations and reducing  costs.  The
restructuring  plan seeks to combine and coordinate the efforts of the Company's
subsidiaries, eliminate redundant functions, promote operating efficiencies, and
focus resources on the new product lines. These actions resulted in a net charge
of $3,784 thousand including $1,692 thousand relating to redundant  compensation
costs;  $1,480 thousand relating to the write-down of inventory,  licenses,  and
other  assets  that are not central to the  Company's  core  business;  and $296
thousand relating to the consolidation of facilities.

Note 3. Operational Transactions
--------------------------------

During fiscal 1999, ITEC disposed of its memory business operations and recorded
a loss of $1,087 thousand.  These  businesses were  characterized by low margins
and price instability,  which were incompatible with the strategic  direction of
the Company.

Effective  May  31,  1998,  the  Company  purchased  the  net  assets  of AMT as
consideration  for the settlement of a license fee receivable (see Note 2). AMT,
as a foreign  sales  subsidiary  located  in the  United  Kingdom,  markets  the
Company's products in the European market.

Effective  November 24, 1997, the Company purchased the total outstanding shares
of the  privately-held  McMican  Corporation,  doing  business  as  ITEC  Memory
("McMican") for 200 thousand shares of unregistered  ITEC common stock.  McMican
produces  specialized  memory modules for handheld personal  computers,  digital
cameras, and printers. This business was disposed of in fiscal 1999 (see above).

Effective  November 30, 1997,  Color  Solutions,  Inc. ("CSI") was merged into a
newly created,  wholly-owned  subsidiary of the Company.  Under the terms of the
Merger  Agreement,  850 thousand shares of  unregistered  ITEC common stock were
exchanged for all of the  outstanding  shares of CSI. On November 30, 1997,  CSI
began operating as a wholly-owned subsidiary of the Company.

Effective  February  14,  1997,  the Company  issued  2,150  thousand  shares of
unregistered ITEC common stock in exchange for all of the outstanding  shares of
NewGen Systems  Acquisition  Corporation  ("NSAC").


                                      -30-
<PAGE>


NSAC  was then  merged  into a newly  created,  wholly-owned  subsidiary  of the
Company,  NewGen  Imaging  Systems,  Inc.  ("NewGen") and was accounted for as a
pooling of interests. NewGen commenced operations in July 1996 and, accordingly,
no restatement of prior financial  statements is required.  NewGen's net loss of
$1,550  thousand  during  fiscal 1997 included  non-recurring  charges of $1,157
thousand  including  purchased research and development of $780 thousand and the
write-down of prepaid licenses and royalties totaling $349 thousand.

Note 4. Composition of Certain Financial Statement Captions
-----------------------------------------------------------

The following summarizes certain financial statement captions at June 30:


<TABLE>
<CAPTION>
                                                                       1999           1998
                                                                       ----           -----
<S>                                                               <C>             <C>
Accounts receivable
          Trade                                                   $   4,211       $  5,068
          Contract                                                        -            458
                                                                   --------        -------
                                                                      4,211          5,526
          Less allowance for doubtful accounts                       (2,252)        (1,393)
                                                                   --------        -------
                                                                  $   1,959       $  4,133
                                                                   ========        =======
Inventories
          Materials and supplies                                  $      50       $  2,081
          Finished goods                                                502          4,206
                                                                   --------        -------
                                                                  $     552       $  6,287
                                                                   --------        -------
Property and equipment
          Computers and other equipment                           $   2,416       $  2,529
          Office furniture and fixtures                                 496            516
          Leasehold improvements                                        141            103
                                                                   --------        -------
                                                                      3,053          3,148
          Less accumulated depreciation and amortization             (2,067)        (1,623)
                                                                   --------        -------
                                                                  $     986       $  1,525
                                                                   ========        =======
Accrued liabilities
          Compensation and vacation                               $     791       $    694
          Interest                                                      618              -
          Severance pay                                                 650              -
          Other                                                         612            704
                                                                   --------        -------
                                                                  $   2,671       $  1,398
                                                                   ========        ========
</TABLE>

Note 5. Supplemental Disclosures of Cash Flows
----------------------------------------------


<TABLE>
<CAPTION>
                                                                     1999             1998             1997
                                                                     ----             ----             ----
<S>                                                              <C>              <C>               <C>
Non-cash financing activities
     Conversion of preferred stock into common stock             $      -         $  2,640          $ 3,060
     Conversion of notes payable into preferred stock               1,000
     Conversion of notes payable into common stock                    950              100            1,582
Conversion of accounts payable and accrued
          liabilities into preferred stock                            265                -                -
     Conversion of accounts payable and accrued
          liabilities into notes payable                                -              987              227
     Stock issued for loans                                             -               53               50
     Fixed assets acquired in business combinations
          Accounts receivable                                           -            1,489                -
          Inventories                                                   -            1,923                -
          Prepaid and other                                             -               51                -
          Property and equipment                                        -               97                -
          Borrowings under bank line of credit                          -            (333)                -
          Accounts payable and accrued liabilities                      -          (2,639)                -
Supplemental disclosure of cash flow information
          Cash paid during the year for interest                    1,371              370              111
          Cash paid during the year for income taxes                   23                5                9
</TABLE>

Note 6. Short-Term Debt
-----------------------

Notes Payable to Bank
---------------------

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.


                                      -31-
<PAGE>

Notes Payable
-------------

The following summarizes short-term notes payable at June 30:
<TABLE>
<CAPTION>

                                                                                                1999           1998
                                                                                                ----           ----
<S>                                                                                       <C>            <C>
Payable to suppliers, 7-8%                                                                $      448     $      998

Advances from stockholders, non interest bearing                                               1,387              -
Payable to stockholders, 16%, convertible into common stock at a price
     of $2.025 per share                                                                         675              -
Payable to stockholders, 16%                                                                   1,000              -
Payable to a director, 16%                                                                     1,500              -
Payable to a  director,  10%,  convertible  on or after  December  31, 1998 into
     common stock at the lesser of $2.36 per share or 85% of the volume weighted
     trade price on the date of conversion                                                         -          1,000
                                                                                            --------      ---------
                                                                                           $   5,010      $   1,998
                                                                                            ========       ========

Note 7. Long-Term Debt
----------------------

The following summarizes long-term debt at June 30:

                                                                                                1999           1998
Note payable to bank in monthly installments of $80 through June 2001 including
     interest at prime plus 0.75%; secured by substantially all assets of the Company      $       -      $   2,500
Notes payable to suppliers in monthly installments through September 2001
     including interest at 7-12%; secured by accounts receivable and equipment                     -            214
Capital lease obligations, 9-20%                                                                   -             17
                                                                                            --------       --------
                                                                                                   -          2,731
Less current portion                                                                               -            903
                                                                                            --------       ---------
                                                                                           $       -      $   1,828
                                                                                            ========       =========
</TABLE>

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

Note 8. Shareholders' Equity
----------------------------

5% Series A Convertible Preferred Stock
---------------------------------------

Holders of the 5%  convertible  preferred  stock  ("Series  A") are  entitled to
receive, when and as declared by the Board of Directors, but only out of amounts
legally  available for the payment  thereof,  cumulative  cash  dividends at the
annual rate of $50.00 per share, payable semi-annually.

The 5% convertible  preferred stock is convertible,  at any time, into shares of
the  Company's  common  stock,  at a price of  $17.50  per  common  share.  This
conversion price is subject to certain anti-dilution  adjustments,  in the event
of certain future stock splits or dividends,  mergers,  consolidations  or other
similar events. In addition,  the Company shall reserve, and keep reserved,  out
of its authorized  but un-issued  shares of common stock,  sufficient  shares to
effect the conversion of all shares of the 5% convertible preferred stock.

In the  event of any  involuntary  or  voluntary  liquidation,  dissolution,  or
winding  up of  the  affairs  of  the  Company,  the  5%  convertible  preferred
stockholders  shall be  entitled  to receive  $1,000 per  share,  together  with
accrued dividends, to the date of distribution or payment, whether or not earned
or declared.

The 5% convertible preferred stock is callable, at the Company's option, at call
prices  ranging from $1,050 to $1,100 per share.  No call on the 5%  convertible
preferred  stock  was made  during  fiscal  1999,  1998,  or 1997.

5% Series B Convertible Preferred Stock
---------------------------------------

In January,  1995, the Company designated 117 shares of previously  undesignated
Preferred Stock as 5% Series B Convertible Preferred Stock, par value $1,000 per
share with a face value of $10,000  per share  ("Series  B").  Each share may be
converted into 1,905 shares of the Company's common stock at the conversion rate
of $5.25.  The holders of the Series B have a liquidation  preference of $10,000
per  Series  B  share  over  the  common  shareholders  but  are  junior  to the
liquidation   preference  of  the  existing  5%  Convertible   Preferred   Stock
shareholders.  Holders  of the Series B are  entitled  to  receive,  when and as
declared by the Board of Directors,  but only out of amounts  legally  available
for the payment  thereof,  cumulative  cash dividends at the annual rate of $500
per share, payable annually.


                                      -32-
<PAGE>

Series C Redeemable Convertible Preferred Stock
-----------------------------------------------

On  August  21,  1997,  the  Company  closed a  private  placement  of its newly
designated Series C Redeemable  Convertible  Preferred Stock ("Series C Shares")
in reliance upon the exemption from securities registration afforded by Rule 506
of Regulation D ("Regulation D") as promulgated by the United States  Securities
and Exchange Commission (the "SEC") under the Securities Act of 1933, as amended
(the "1933 Act"). In the initial closing of $5 million, ITEC issued 500 Series C
Shares and  warrants to purchase up to 200,000  shares of the  Company's  common
stock. After satisfying certain holding periods, each of the newly issued Series
C Shares is  convertible,  at the option of its  holder,  into  shares of Common
Stock of the Company  based upon a conversion  price equal to $9.00 or if lower,
the lowest  closing  market  price of the  Company's  Common  Stock during the 7
trading days prior to the  conversion  date. The warrants have an exercise price
of $7.50 per share.  Subject to certain additional  conditions,  the Company had
the right to call for a second round of  financing up to an aggregate  amount of
$5 million, beginning on and including January 1, 1998 and ending June 30, 1998.
This additional  round of financing would have involved the issuance of up to an
additional  500 Series C Shares and  warrants  for the purchase of up to 200,000
shares of Common  Stock.  Additionally,  purchasers  of the Series C Shares were
entitled  to  purchase  additional  Series C Shares  up to 40% of the  number of
Series C Shares held by each investor on December 31, 1997.

During fiscal 1998,  264 shares of Series C Shares were  converted  into 958,598
shares of common  stock.  On  September  25,  1998,  the  Company  redeemed  all
outstanding shares of the Series C Convertible Preferred Stock. See Note 13.

As of January 13, 1999, the Company entered into a Securities Purchase Agreement
(the "Series D Agreement") with certain  investors,  which provided a funding of
$2.4 million (the  "Series D  Funding").  The Series D Funding  provided for the
private  placement  by the  Company  of 1,200  units  (the  "Units"),  each Unit
consisting of (i) one share of Series D Convertible Preferred Stock (the "Series
D Stock") and (ii) 2,000  warrants (the "Series D Warrants"  and,  collectively,
with the Series D Stock,  the "Series D Securities")  exercisable  for shares of
Common  Stock.  The Series D Stock is  convertible  into shares of the Company's
Common  Stock at the lesser of (A) $.50 and (B) an amount equal to 70 percent of
the closing bid price per share of Common  Stock on the Nasdaq  SmallCap  Market
(the  "Series D Closing  Price")  for the three  trading  days having the lowest
closing price during the 30 trading days prior to the date on which the investor
gives to the Company a notice of conversion  of Series D Stock;  except that all
Series D Stock  converted prior to February 26, 1999 would be converted at $.50.
However,  each of the investors agreed that in no event shall it be permitted to
convert any shares of Series D Stock in excess of the number of such shares upon
the  conversion  of which,  the sum of (i) the number of shares of Common  Stock
owned by such  investor  (other  than  shares  of  Common  Stock  issuable  upon
conversion  of Series D Stock or upon  exercise of Series D Warrants)  plus (ii)
the number of shares of Common Stock issuable upon  conversion of such shares of
Series D Preferred Stock or exercise of Series D Warrants,  would be equal to or
exceed  9.999  percent of the number of shares of Common  Stock then  issued and
outstanding,  including the shares that would be issuable upon conversion of the
Series D Stock or  exercise  of Series D Warrants  held by such  investor.  Each
investor in Series D Stock has the right to vote,  except as otherwise  required
by Delaware  law, on all matters on which holders of Common Stock have the right
to vote on with each such  investor  having  the right to cast one vote for each
whole  share of Common  Stock into  which  each share of the Series D  Preferred
Stock held by such investor is convertible  immediately prior to the record date
for the determination of stockholders entitled to vote; provided,  however, that
in no event is a holder  entitled to vote more than 9.999  percent of the number
of  shares  entitled  to be voted on any  matter.  The  Series  D  Warrants  are
immediately  exercisable  upon issuance at an exercise  price of $.875 per share
and expire five years after the date of their issuance.

As of February 2, 1999, the Company entered into a Securities Purchase Agreement
(the "Series E Agreement")  with certain  investors  (including one of whom is a
director of the Company), which provided funding and exchange of indebtedness of
$4,155,000  and, as of February 18, 1999,  the Company  entered into an Exchange
Agreement (the "Exchange  Agreement") with certain  investors for an exchange of
indebtedness  of  approximately  $1,150,000  (the  Series  E  Agreement  and the
Exchange Agreement being together the " Series E Funding"). The Series E Funding
provided for the private  placement by the Company of 1,250 units (the "Units"),
each Unit  consisting of (i) one share of Series E Convertible  Preferred  Stock
(the "Series E Stock") and (ii) 5,000  warrants  (the  "Series E Warrants"  and,
collectively,  with the Series E Stock,  the "Series E Securities")  exercisable
for shares of Common Stock. The Series E Stock is convertible into shares of the
Company's  Common  Stock at the lesser of (A) $.50 and (B) an amount equal to 70
percent  of the  closing  bid  price per  share of  Common  Stock on the  Nasdaq
SmallCap Market (the "Series E Closing Price") for the three trading days having
the lowest  closing  price during the 30 trading days prior to the date on which
the  applicable  investor  gives to the Company notice of conversion of Series E
Stock; except that all Series E Stock converted prior to February 26, 1999 would
be  converted  at $.50.  Each  investor in Series E Stock has the right to vote,
except as otherwise required by Delaware law, on all


                                      -33-
<PAGE>


matters  on which  holders  of Common  Stock have the right to vote on with each
such  investor  having the right to cast one vote for each whole share of Common
Stock  into  which  each  share of the  Series E  Preferred  Stock  held by such
investor  is  convertible   immediately   prior  to  the  record  date  for  the
determination  of  stockholders  entitled  to vote.  The Series E  Warrants  are
immediately  exercisable  upon issuance at an exercise  price of $.875 per share
and expire five years after their date of issuance.

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.

The offers and sales to the Series D and E  investors  were made  pursuant  to a
claim of exemption  under  Section 4(2) of the  Securities  Act, as amended (the
"Securities  Act").  The  Company  did  not  use any  general  advertisement  or
solicitation  in  connection  with  the  offer  or  sale of the  Series  D and E
Securities to the Series D and E investors. Each of the Series D and E investors
represented and warranted,  among other things, that he or it was purchasing the
Series D and E Securities, as applicable, for investment purposes and not with a
view to distribution and that he or it was an "accredited  investor" (as defined
in Regulation D promulgated by the SEC). Appropriate legends were affixed to the
certificates for each of the Series.

Conversion of Preferred Stock
-----------------------------

During  fiscal 1997,  the Company  extended an offer to holders of the Company's
Series A and Series B to convert  the  accumulated  dividends  of  approximately
$1,789 thousand and $116 thousand, respectively, into unregistered shares of the
Company's  common  stock at a conversion  rate of $7.50.  Under the terms of the
offer, Series A shareholders  converted 1,897.5 shares and approximately  $1,381
thousand of the accumulated  dividend and Series B shareholders  converted 116.2
shares  and  approximately  $116  thousand  of  the  accumulated  dividend  into
unregistered  shares of the  Company's  common stock.  As of June 30, 1998,  the
accumulated dividend in arrears was approximately $518 thousand on the Series A.

Common Stock Warrants
---------------------

The Company, from time-to-time, grants warrants to employees, directors, outside
consultants and other key persons,  to purchase  shares of the Company's  common
stock,  at an exercise price equal to no less than the fair market value of such
stock on the date of  grant.  The  terms  and  vesting  of  these  warrants  are
determined by the Board of Directors on a case-by-case basis. The following is a
summary of the warrant activity:

                                                             Underlying
                                  Price Per Share          Common Shares

June 30, 1996                     $1.00 - $7.50               2,469
          Granted                 $5.00 - $6.25                 845
          Exercised               $1.00 - $3.75                 (91)
                                                              -----

June 30, 1997                     $1.00 - $7.50               3,223
          Granted                 $2.25 - $7.50               1,930
          Exercised               $1.00 - $5.50                (524)
          Canceled                $4.00 - $6.25                (145)
                                                              -----

June 30, 1998                     $1.00 - $7.50               4,484
          Granted                 $1.13 - $4.00               2,185
          Exercised               $1.00 - $1.00                (271)
          Canceled                $1.90 - $7.50                (658)
                                                              -----

June 30, 1999                     $1.00 - $7.50               5,740
                                                              =====

Exercisable at June 30, 1999      $1.00 - $7.50               3,659
                                                              =====

Common Stock Option Plans
-------------------------

In July 1984 ("1984  Plan"),  November  1987 ("1988 Plan") and  September,  1996
("1997 Plan"),  the Company  adopted stock option plans,  under which  incentive
stock  options and  non-qualified  stock  options  may be granted to  employees,
directors,  and other key persons,  to purchase  shares of the Company's  common
stock,  at an exercise price equal to no less than the fair market value of such
stock on the date of grant,  with such options  exercisable in  installments  at
dates  typically  ranging  from one to not more than ten years after the date of
grant.

Under the terms of the 1988 and 1997 Plans,  loans may be made to option holders
which  permit the option  holders to pay the option  price,  upon  exercise,  in
installments.  A total of  212,000  and  1,000,000  shares of  common  stock are
authorized for issuance under the 1988 and 1997 Plans,  respectively.


                                      -34-
<PAGE>

No shares  are  available  for  future  issuance  under the 1984 Plan due to the
expiration  of the plan during  1994.  As of June 30,  1999,  options to acquire
2,000 shares were outstanding under the 1984 Plan and options to acquire 670,000
shares remained available for grant under the 1988 and 1997 Plans.

In  addition,  the Board of  Directors,  outside  the 1984,  1988 and 1997 Plans
("Outside Plan"), granted to employees,  directors and other key persons of ITEC
or its subsidiaries options to purchase shares of the Company's common stock, at
an exercise  price equal to no less than the fair market  value of such stock on
the date of grant.

Options are exercisable in  installments at dates typically  ranging from one to
not more than ten years after the date of grant.  In October 1995,  the Board of
Directors  authorized the exercise price for employee options and warrants to be
reduced to the current  market  value.  Accordingly,  the  exercise  price on an
aggregate  of 18,220  and  275,000  options  under the 1988 and  Outside  Plans,
respectively,  were  canceled  and  reissued at an  exercise  price of $1.00 per
share.

Common Stock Purchase Plan
--------------------------

The 1997  Employee  Stock  Purchase Plan  ("Purchase  Plan") was approved by the
Company's shareholders in September 1996. The Purchase Plan permits employees to
purchase the Company's common stock at a 15% discounted price. The Purchase Plan
is designed to encourage and assist a broad spectrum of employees of the Company
to acquire an equity  interest in the Company through the purchase of its common
stock. It is also intended to provide  participating  employees the tax benefits
under Section 421 of the Code.  The Purchase Plan covers an aggregate of 500,000
shares  of the  Company's  common  stock.

All  employees,  including  executive  officers and directors who are employees,
customarily  employed  more than 20 hours per week and more than five months per
year by the Company are  eligible to  participate  in the  Purchase  Plan on the
first  enrollment  date  following  employment.  However,  employees  who  hold,
directly or through  options,  five  percent or more of the stock of the Company
are not eligible to participate.

Participants may elect to participate in the Purchase Plan by contributing up to
a maximum of 15 percent of their compensation,  or such lesser percentage as the
Board may establish  from time to time.  Enrollment  dates are the first trading
day  of  January,  April,  July  and  October  or  such  other  dates  as may be
established  by the Board  from time to time.  On the last  trading  day of each
December,  March, June and September,  or such other dates as may be established
by the Board from time to time,  the  Company  will apply the funds then in each
participant's  account  to the  purchase  of  shares.  The  cost of  each  share
purchased is 85 percent of the lower of the fair market value of common stock on
(i) the enrollment  date or (ii) the purchase date. The length of the enrollment
period may not exceed a maximum of 24 months. No participant's  right to acquire
shares may accrue at a rate  exceeding  $25,000 of fair  market  value of common
stock  (determined  as of the first trading day in an enrollment  period) in any
calendar year. No shares have been issued under the Purchase Plan.

Stock Option Activity
---------------------

The following is a summary of the stock option activity:
<TABLE>
<CAPTION>

                                              1994, 1988 and 1997 Plans               Other Options
                                               Price          Underlying         Pricece      Underlying
                                                Per             Common             Per          Common
                                               Share            Shares            Share         Shares
                                          ------------        ----------         ------       ---------
<S>                                       <C>                 <C>                <C>          <C>
June 30, 1996                             $1.00 - $5.10            36            $1.00           313
          Granted                         $3.60 - $8.45           104                              -
          Exercised                       $1.00 - $2.10            (5)           $1.00           (78)
          Canceled                        $1.00 - $7.95           (13)                             -
                                                                 -----                         -----
June 30, 1997                             $1.00 - $8.45           122            $1.00           235
          Granted                         $1.95 - $4.88           373                              -
          Exercised                       $1.00 - $3.45            (5)           $1.00           (37)
          Canceled                        $1.00 - $8.45           (94)           $1.00            (3)
                                                                 -----                         -----
June 30, 1998                             $1.00 - $8.45           396            $1.00           195
          Granted                         $0.91 - $1.90           619
          Exercised                                                 -
          Canceled                        $1.06 - $6.90          (195)           $1.00            (2)
                                                                 -----                         -----
June 30, 1999                             $0.91 - $8.45           820            $1.00           193
                                                                 -----
Exercisable at June 30, 1999              $0.91 - $8.45           157            $1.00           193
                                                                 ====                           ====
</TABLE>
                                      -35-
<PAGE>

Accounting for Stock-Based Compensation
---------------------------------------

The  Company  applies  Accounting  Principles  Board  Opinion No. 25 and related
Interpretations  in accounting for its stock option plans. The Company has opted
under  Statement of Financial  Accounting  Standards  No. 123,  "Accounting  for
Stock-Based  Compensation" ("SFAS 123") to disclose its stock-based compensation
with no financial  effect.  The pro forma  effects of applying  SFAS 123 in this
initial  phase-in  period are not necessarily  representative  of the effects on
reported net income or loss for future years. Had  compensation  expense for the
Company's  stock option plans been  determined  based upon the fair value at the
grant  date for  awards  under  these  plans  consistent  with  the  methodology
prescribed  under SFAS 123, the  Company's  pro forma net income  (loss) and net
income (loss) per share would have been as follows for the years ended June 30:

                                            1999            1998          1997
                                            ----            ----          ----
Net income (loss)

          As reported                   $ (25,129)      $ (10,163)      $  723
          Pro forma                       (26,500)        (11,154)         518

Basic earnings (loss) per share

          As reported                   $   (1.62)      $   (0.90)       $0.07
          Pro forma                         (1.71)          (0.99)        0.05


The weighted average fair value of the options granted during fiscal years 1998,
1997, and 1996 is estimated on the date of grant using the Black-Scholes  option
pricing model. The weighted average fair values and weighted average assumptions
used in calculating the fair values were as follows for the years ended June 30:

                                    1999         1998          1997
                                    ----         ----          ----

Fair Value of options granted     $ 2.50      $  2.37       $  5.45
Risk free interest rate               6%           6%            7%
Expected life (years)                  3            3             5
Expected volatility                  95%          95%           95%
Expected dividends                     -            -             -


Note 9. Significant Customers, Revenue Data, and Concentration of Credit Risk
-----------------------------------------------------------------------------

As of and  during the years  ended June 30,  1999,  1998,  and 1997 no  customer
accounted  for  more  than  10% of  consolidated  accounts  receivable  or total
consolidated revenues.

The majority of the Company's  product sales in fiscal 1999, 1998, and 1997 were
to  European  distributors   (denominated  in  U.S.  dollars)  in  the  computer
peripherals and accessories  market,  including imaging and data storage devices
and printers,  through its wholly-owned  subsidiaries.  A significant portion of
contract revenue is derived from OEMs and co-developers who are headquartered in
the Asia.  Revenues from foreign customers as a percentage of total consolidated
revenues  were 16% in 1999,  56% in  fiscal  1998,  and 57% in fiscal  1997,  as
reflected in the following table for the years ended June 30:

                    1999         1998        1997
                    ----         ----        ----

Europe         $     981    $  13,912    $ 12,221
Asia               1,530        4,189       4,438
Others               326        1,223       1,764
                --------     --------     -------
               $   2,837    $  19,324    $ 18,423
                ========     ========     =======

Note 10. Income Taxes
---------------------

The Company's  provision  for income taxes is accounted  for in accordance  with
Statement of Financial  Accounting  Standards  No. 109,  "Accounting  for Income
Taxes" ("SFAS 109").  SFAS 109 requires  recognition  of deferred tax assets and
liabilities  for the expected  future tax  consequences of events that have been
included in the financial  statements  or tax returns.  Under the SFAS 109 asset
and liability  method,  deferred tax assets and liabilities are determined based
upon the difference between the financial  statement and tax bases of assets and
liabilities  using the  enacted  tax  rates in effect  for the year in which the
differences are expected to reverse. A valuation  allowance is then provided for
deferred tax assets which are more likely than not to not be realized.


                                      -36-
<PAGE>


The benefit  (provision) for income taxes is as follows for the years ended June
30:

                                           1999        1998         1997
                                           ----        ----         ----

Current - State                        $   (23)     $  (18)    $     (5)
Deferred benefit (expense)                (241)          -          241
                                        ------       ------     -------
                                       $  (264)     $  (18)    $    236
                                        ======       ======     =======

The components of deferred income taxes are as follows at June 30:


<TABLE>
<CAPTION>

                                                                         1999         1998         1997
                                                                         ----         ----         ----
<S>                                                                 <C>          <C>          <C>
Deferred tax assets

     Net operating loss carryforwards                               $  20,000    $   9,627    $   4,953
     Book reserves and accrued liabilities                                750          490          349
     Federal general business credits and other tax credits               517          517          517
     State R&D and other credits                                          102          102          102
                                                                       ------       ------        -----
                                                                       21,369       10,736        5,921
Valuation allowance                                                   (21,369)     (10,495)      (5,680)
                                                                      -------       ------        ------
                                                                    $       -    $     241    $     241
                                                                      =======       ======        ======
</TABLE>

The  Company's  federal and state net  operating  loss  carryforwards  expire in
various  years  through  2013.  Additionally,  the  Company's  federal and state
research and  development  credits expire in various years through 2009.  During
1991 the Company  sustained a change in  ownership  as defined in Section 382 of
the Internal  Revenue Code; as a result,  an annual  limitation of approximately
$350  thousand  was  imposed  on the  utilization  of  the  net  operating  loss
carryforwards  generated prior to the date of change.  In addition,  Section 383
places a  limitation  on the  usage  of tax  credits  generated  prior to such a
change.  Subsequent to the date of the ownership change in 1991, there have been
numerous  additional  equity  issuances;  as a  result,  the  Company  may  have
experienced, or could experience in the future, similar ownership changes, which
could  result  in  additional  limitations  on  the  annual  utilization  of the
Company's net operating loss  carryforwards  and tax credits  generated prior to
the new change in ownership.

The provision  for income taxes results in an effective  rate which differs from
the federal  statutory rate. A  reconciliation  between the actual tax provision
and taxes  computed at the statutory rate is as follows for the years ended June
30:

<TABLE>
<CAPTION>
                                                                1999        1998      1997
                                                                ----        ----      ----
<S>                                                         <C>             <C>      <C>
Benefit (provision) at federal statutory income tax rate    $  8,544    $  3,449    $ (246)
Utilization of federal net operating loss carryforward             -           -       485
Losses for which no current benefit is available              (8,544)     (3,449)        -
State income taxes                                               (23)        (18)       (5)
                                                             -------     -------     -----
                                                            $    (23)   $    (18)   $  234
                                                             ========    =======     =====
</TABLE>

Note 11. Commitments and Contingencies
--------------------------------------

Lease Commitments
-----------------

The Company leases certain equipment under non-cancelable  capital leases, which
are included in property and  equipment.  At June 30, 1999,  1998 and 1997,  the
cost of  such  equipment  was  $56,  $56  and  $117  thousand  and  the  related
accumulated  amortization  was $56, $37 and $54 thousand,  respectively.  Future
commitments  under capital lease obligations are included with long-term debt in
Note 7.

The  Company  and  its  subsidiaries  lease  operating  facilities  under  lease
agreements that expire at various dates through March 2006. Total rental expense
was approximately $579 in fiscal 1999, $574 thousand in fiscal 1998, and $509 in
fiscal 1997.

Future  minimum lease payments under these  long-term  non-cancelable  operating
leases are as follows: Year ending June 30,

2000                                $     606
2001                                      707
2002                                      734
2003                                      678
2004                                      705
Thereafter                              1,298
                                     --------
                                    $   4,728
                                     ========

Legal Matters
-------------

On or about February 2, 1999, American Industries, Inc., Ellison Carl Morgan and
entities  related to Ellison Carl Morgan (the  "Plaintiffs")  served the Company
and certain  officers and  directors of the Company  (the  "Defendants")  with a
lawsuit  filed in the  Circuit  Court of the State of Oregon  for the  County of
Multnomah,  alleging that the Defendants violated certain Oregon Securities Laws
in connection  with the  Plaintiffs'


                                      -37-
<PAGE>

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  by  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 had filed an answer to the complaint and the case is
progressing through normal procedures.

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.

Note 12. Related Party Transactions
-----------------------------------

A former  director  receives  compensation  as a  consultant  to the  Company on
corporate matters and investment  banking issues under an agreement  expiring in
June 2002.  These  consulting fees amounted to $56 thousand in fiscal 1999, $120
thousand in fiscal 1998, and $120 thousand in 1997.  Effective July 1, 1998, the
annual  consulting  fee under the  agreement  has been reduced to $56  thousand.
During fiscal 1996,  approximately  $81 thousand of accrued  consulting fees and
$27  thousand  of  accrued  directors  fees owed to this  former  director  were
converted into unregistered  shares of the Company's common stock. During fiscal
1998, as consideration  for services  provided relating to the private placement
of the Series C Preferred Stock, this former director  received  commissions and
expense reimbursement  totaling $200 thousand of which $100 thousand was paid in
cash and $100  thousand was used to exercise  warrants  for 100,000  shares at a
price of $1.00 per share.

In June 1998,  one of the Company's  former  directors  converted a loan of $100
thousand into 64,516 shares of the Company's common stock.

In June 1998, a director of the Company loaned $1 million to the Company under a
10% note  payable due on or after  December  31, 1998 and  convertible  into the
Company's  common  stock at the  lesser of $2.36 per share or 85% of the  volume
weighted trade price on the date of conversion.  In fiscal 1999,  this loan plus
accrued  interest and directors  fees totaling $265 thousand were converted into
253 shares of Series E Preferred Stock.

Note 13. Events Subsequent to June 30, 1999
-------------------------------------------

Subsequent  to June 30, 1999,  notes payable of $1,000  thousand were  converted
into 230 shares of Series E Preferred  Stock;  Series D Preferred Stock totaling
$740 thousand was converted into 2,348,089 shares of common stock; and, Series E
Preferred Stock totaling $3,620 thousand was converted into 8,838,479  shares of
common stock. In addition,  the Company issued  10,690,888  shares of its common
stock at prices ranging from $0.30 to $1.00 per share to fund  operations and to
settle certain claims, judgements, and other obligations.

ITEM 9.

Changes In and  Disagreements  With  Accountants
On  Accounting  and  Financial Disclosure
------------------------------------------------

None

                                      -38-


<PAGE>

Part III

Pursuant to General  Instruction G(3) to Form 10-K, the information  required by
Items  10,  11,  12,  and 13 of Part III is  incorporated  by  reference  to the
Company's  definitive Proxy Statement with respect to its 1999 Annual Meeting of
Stockholders,  to be filed  pursuant to Regulation 14A or to an amendment to the
Form 10-K within 120 days after June 30, 1999.

PART IV

ITEM 14.

EXHIBITS,  FINANCIAL STATEMENT SCHEDULES,  AND REPORTS ON FORM 8-K
------------------------------------------------------------------

(a)  Documents filed as part of this Form 10-K:

     (1)  FINANCIAL STATEMENTS:

     The  financial  statements  of the Company are included  herein as required
     under Item 8 of this  Annual  Report on Form 10-K.  See Index to  Financial
     Statement.

     (2)  FINANCIAL STATEMENT SCHEDULES:

     Financial  Statement  Schedules  have  been  omitted  because  they are not
     applicable  or not  required  or the  information  required to be set forth
     therein is included in the financial statements or notes thereto.

(b)  Reports on Form 8-K:

     No  reports on Form 8-K were  filed  during the last  quarter of the fiscal
     year ended June 30,1999.

(c)  Exhibits.

The following  exhibits are filed as part of, or
incorporated by reference into, this Form 10-K:
------------------------------------------------

3(a)      Certificate of Incorporation of the Company, as amended, and currently
          in effect. See also below.  (Incorporated by reference to Exhibit 3(a)
          to 1988 Form 10-K.)                                                  *

3(b)      Certificate  of  Amendment  of  Certificate  of  Incorporation  of the
          Company,  filed February 8, 1995, as amended, and currently in effect.
          (Incorporated by reference to Exhibit 3(b) to 1995 Form 10-K.)       *

3(c)      Certificate  of  Amendment  of  Certificate  of  Incorporation  of the
          Company,  filed May 23,  1997,  as amended,  and  currently in effect.
          (Incorporated by reference to 1997 Form 10-K.)                       *

3(d)      Certificate  of  Amendment  of  Certificate  of  Incorporation,  filed
          January 12, 1999, as amended and currently in effect. (Incorporated by
          reference to Form 10-Q for the period ended December 31, 1998.)      *

3(e)      Certificate Eliminating Reference to Certain Series of Shares of Stock
          from the  Certificate  of  Incorporation,  filed  January 12, 1999, as
          amended and  currently in effect.  (Incorporated  by reference to Form
          10-Q for the period ended December 31, 1998.)                        *

3(f)      By-Laws  of  the  Company,  as  amended,   and  currently  in  effect.
          (Incorporated by reference to Exhibit 3(b) to 1997 Form 10-K.)       *

4(a)      Amended Certificate of Designation of Imaging Technologies Corporation
          with respect to the 5% Convertible  Preferred Stock.  (Incorporated by
          reference to Exhibit 4(d) to 1987 Form 10-K.)                        *

4(b)      Amended Certificate of Designation of Imaging Technologies Corporation
          with  respect  to  the  5%  Series  B  Convertible   Preferred  Stock.
          (Incorporated by reference to Exhibit 4(b) to 1988 Form 10-K.)       *

4(c)      Certificate  of  Designations,  Preferences  and  Rights  of  Series C
          Convertible  Preferred  Stock  of  Imaging  Technologies  Corporation.
          (Incorporated by reference to Exhibit 4(c) to 1998 Form 10-K.)       *

4(d)      Certificate  of  Designation,  Powers,  Preferences  and Rights of the
          Series  of  Preferred  Stock to be  Designated  Series  D  Convertible
          Preferred Stock, filed January 13, 1999. (Incorporated by reference to
          Form 10-Q for the period ended December 31, 1998.)                   *

4(e)      Certificate  of  Designation,  Powers,  Preferences  and Rights of the
          Series  of  Preferred  Stock to be  Designated  Series  E  Convertible
          Preferred Stock, filed January 28, 1999. (Incorporated by reference to
          Form 10-Q for the period ended December 31, 1998.)                   *

10(a.1)   1984 Stock Option Plan for the Company.  (Incorporated by reference to
          Form S-8, filed October 26, 1984, File No. 2-93993.)                 *

10(a.2)   Forms of Standard  Non-Qualified  and Incentive Stock Option Agreement
          for 1984 Stock  Option Plan.  (Incorporated  by reference to Form S-8,
          filed October 26, 1984, File No. 2-93993.)                           *

10(b.1)   1988 Stock Option Plan for the Company.  (Incorporated by reference to
          Exhibit 10(g) to 1989 Form 10-K.)                                    *


                                      -39-
<PAGE>


10(b.2)   Amendment and Restatement of 1988 Stock Option Plan.  (Incorporated by
          reference to Exhibit 10(d) to 1991 Form 10-K.)                       *

10(b.3)   Forms of Standard  Non-Qualified  and Incentive Stock Option Agreement
          for 1988 Stock  Option  Plan.  (Incorporated  by  reference to Exhibit
          10(e) to 1991 Form 10-K.)                                            *

10(c)     Standard Industrial Lease  Multi-Tenant-Modified Net dated January 24,
          1996 between the Company and  Bernardo View,  Ltd.;  addendum  I   and
          addendum  II  to  lease;    addendum  Ill to lease.  (Incorporated  by
          reference to Exhibit 10(c) to 1996 Form 10-KSB.)                     *

10(d)     Reference is made to the various stock options and warrants granted in
          1996 to directors and  executive  officers of the Company as described
          in Notes 6 and 7 to the 1996 Financial  Statements.  (Incorporated  by
          reference to Forms S-8 dated February 12, 1996,  File Nos.  333-00871,
          333-00873 and 333-00879.)                                            *

10(e.1)   Executive Employment  Agreement,  as amended,  between the Company and
          Edward W. Savarese, dated July 1, 1990, and amended as of February 25,
          1994.  (Incorporated  by  reference  to  Exhibit  10(k)  to 1994  Form
          10-KSB.)                                                             *

10(e.2)   Compensation  Agreement  between the  Company and Edward W.  Savarese,
          dated November 16, 1992.  (Incorporated by reference to Exhibit 10(af)
          to 1993 Form 10-KSB.)                                                *

10(e.3)   Amendment to  Employment  Agreement  between the Company and Edward W.
          Savarese  dated April 1, 1998.  (incorporated  by reference to Exhibit
          10(e.3) to 1998 Form 10-K.)                                          *

10(e.4)   Amendment to Executive  Employment  Agreement  between the Company and
          Edward W. Savarese dated June 12, 1998. (Incorporated  by reference to
          Exhibit 10(e.4) to 1998 Form 10-K.)                                  *

10(f)     Compensation  Agreement  between  the  Company and Harry J. Saal dated
          November 16,  1992.  (Incorporated  by reference to Exhibit  10(ad) to
          1993 Form 10-KSB.)                                                   *

10(g.1)   Compensation  Agreement  between  the  Company  and Irwin  Roth  dated
          November 16,  1992.  (Incorporated  by reference to Exhibit  10(ag) to
          1993 Form 10-KSB.)                                                   *

10(g.2)   Consulting  Agreement,  dated  April I, 1994,  between the Company and
          Irwin Roth.  (Incorporated by reference to Exhibit 10(az) to 1994 Form
          10-KSB.)                                                             *

10(g.3)   Amendment  to  Consulting  Agreement  dated June 12, 1998  between the
          Company and Irwin Roth.  (Incorporated by reference to Exhibit 10(g.3)
          to 1998 Form 10-K.)                                                  *

10(h)     Acquisition   Agreement  for   acquisition   of  Prima   International
          subsidiary on October 1, 1993.  (Incorporated  by reference to Exhibit
          2.1 to Amendment No. 1 to Form 8K/A dated October 14. 1993.)         *

10(i.1)   Third Party Development  Partner License Agreement,  effective October
          22,  1993,  between  the  Company  and  Adobe  Systems   Incorporated.
          (Incorporated by reference to Exhibit 10(ai) to 1994 Form 10-KSB.)   *

10(i.2)   Reference  Port  Appendix  No.  I  dated  October  22,  1993,  to  the
          Postscript  Support  Source  and  Object  Code  Distribution   License
          Agreement   between  Adobe  Systems   Incorporated  and  the  Company.
          (Incorporated by reference to Exhibit 10(aj) to 1994 Form 10-KSB.)   *

10(j)     ITEC/APS License  Agreement dated March 28. 1994,  between the Company
          and Integrated Device Technology,  Inc.  (Incorporated by reference to
          Exhibit 10(ak) to 1994 Form 10-KSB.)                                 *

10(k)     International Sales  Representative  Agreement dated October 15, 1993,
          between the  Company  and Nippo Ltd.  (Incorporated  by  reference  to
          Exhibit 10(ao) to 1994 Form 10KSB.)                                  *

10(l)     Consulting  Agreement dated September 17, 1993 between the Company and
          Marius A.  Robinson.  (Incorporated  by reference to Exhibit 10(aq) to
          1994 Form 10-KSB.)                                                   *

10(m.1)   Warrant  Purchase  Agreement,  dated  September 17. 1993,  between the
          Company and Robinson International  Ltd. (Incorporated by reference to
          Exhibit 10(ar) to 1994 Form 10-KSB.)                                 *

10(m.2)   Warrant  Certificate for 250,000 Warrants to Purchase Shares of Common
          Stock of the  Company at $1.50 per share  dated  September  17,  1993,
          between the Company and Robinson International,  Ltd. (Incorporated by
          reference to Exhibit 10(as) to 1994 Form 10-KSB.)                    *

10(m.3)   Warrant  Certificate for 250,000 Warrants to Purchase Shares of Common
          Stock of the  Company at $1.00 per share  dated  September  17,  1993,
          between the Company and Robinson International,  Ltd. (Incorporated by
          reference to Exhibit 10(at) to 1994 Form 10KSB.)                     *

10(n)     ITEC/MEl  License  Agreement  dated  September  30,  1994  between the
          Company and Matsushita Electric Industrial Co., Ltd.  (Incorporated by
          reference to Exhibit 10(aac) to 1994 Form 10-KSB.)                   *

10(o)     Form of Standard  Warrant  Agreement  dated  January 3, 1996 issued to
          Harry J. Saal as described in Note 6 to the 1996 Financial Statements.
          (Incorporated by reference to Exhibit 10(o) to 1996 Form 10-KSB.)    *

10(p)     Form  of  Standard   Warrant  and  Consulting   Agreement   issued  to
          consultants as described in Note 6 to the 1996  Financial  Statements.
          (Incorporated  by reference to Form S-8 dated May 9, 1996, File Number
          333-03375.)                                                          *

10(q)     Compensation  Agreement  between  the  Company  and Brian  Bonar dated
          September 1, 1994. (Incorporated by reference to Exhibit 10(q) to 1996
          Form 10-KSB.)                                                        *


                                      -40-
<PAGE>


10(q.1)   Amendment to Employment  Agreement between the Company and Brian Bonar
          dated April 1, 1998.  (Incorporated by reference to Exhibit 10(q.1) to
          1998 Form 10-K.)                                                     *

10(r)     Promissory  Note between  Imperial Bank and the Company dated June 23,
          1998. (Incorporated by reference to Exhibit 10(r) to 1998 Form 10-K.)*

10(s)     Security and Loan Agreement and Addendum thereto  (Eximbank  Facility)
          between   Imperial   Bank  and  the  Company   dated  June  23,  1998.
          (Incorporated by reference to Exhibit 10(s) to 1998 Form 10-K.)      *

10(t)     Security and Loan Agreement and Addendum  thereto (Foreign Insured A/R
          Line)  between  Imperial  Bank and the  Company  dated  June  23.1998.
          (Incorporated by reference to Exhibit 10(t) to 1998 Form 10-K.)      *

10(u)     Security and Loan  Agreement  and  Addendum  thereto  (Domestic  Line)
          between   Imperial   Bank  and  the   Company   dated  June   23,1998.
          (Incorporated by reference to Exhibit 10(u) to 1998 Form 10-K.)      *

10(v)     Amended  and  Restated  Agreement  and  Plan  of  Merger  and  Plan of
          Reorganization  dated  February  12,  1997 between  and  among  NewGen
          Systems   Acquisition   Corporation,   NewGen   Imaging   Technologies
          Corporation   and   Personal    Computer    Products,    Incorporated.
          (Incorporated by reference to form 8-K dated April 28, 1998.)        *

10(w)     Warrant to Purchase Stock between  Imperial Bank and the Company dated
          June 23, 1998.  (Incorporated  by  reference to Exhibit  10(w) to 1998
          Form 10-K.)                                                          *

10(x)     Securities  Purchase  Agreement  between  Buyers and the Company dated
          August 21, 1997.  (Incorporated  by reference to Exhibit 10(x) to 1998
          Form 10-K.)                                                          *

10(y)     Registration  Rights  Agreement  between  Buyers and the Company dated
          August 21, 1997   (Incorporated  by reference to Exhibit 10(y) to 1998
          Form 10-K.)                                                          *

10(z)     Form of  Warrant  to  Purchase  Common  Stock  between  buyers and the
          Company dated August  21,1997.  (Incorporated  by reference to Exhibit
          10(z) to 1998 Form 10-K.)                                            *

10(aa)    Promissory  Note  between  DataProducts  Corporation,  NewGen  Imaging
          Systems,  Inc. and the Company  dated June  30, 1998. (Incorporated by
          reference to Exhibit 10(aa) to 1998 Form 10-K.)                      *

10(ab)    Stock Purchase  Agreement  between the Company and Stockholders of New
          Media Memory Inc. dated November 28, 1997.  (Incorporated by reference
          to Exhibit 10(bb) to 1998 Form 10-K.)                                *

10(ac)    Agreement  and Plan of Merger and Plan of  Reorganization  between the
          Company,  ITEC Sub and Color  Solutions,  Incorporated  dated November
          30,1997.  (Incorporated  by reference  to Exhibit  10(ac) to 1998 Form
          10-K.)                                                               *

10(ad)    Forbearance  Agreement  entered  into as of November  4, 1998,  by and
          among the Company,  certain of the Company's subsidiaries and Imperial
          Bank.  (Incorporated by reference to Exhibit 10.1 to Form 10-Q for the
          period ended December 31, 1998.)                                     *

10(ae)    Letter of Credit  Reimbursement  Agreement  dated as of  November  18,
          1998,  by and  between  the  Company  and  American  Industries,  Inc.
          (Incorporated by reference to Exhibit 10.2 to Form 10-Q for the period
          ended December 31, 1998.)                                            *

10(af)    Securities  Purchase  Agreement  dated as of January 13, 1999,  by and
          among  the  Company  and  the   applicable   parties  named   therein.
          (Incorporated by reference to Exhibit 10.3 to Form 10-Q for the period
          ended December 31, 1998.)                                            *

10(ag)    Registration  Rights  Agreement  dated as of January 13, 1999,  by and
          among  the  Company  and  the   applicable   parties  named   therein.
          (Incorporated by reference to Exhibit 10.4 to Form 10-Q for the period
          ended December 31, 1998.)                                            *

10(ah)    Form of Warrant to Purchase  Shares of Common  Stock of the Company at
          $.875 per share dated  January 1, 1999,  between the Company and each
          of  the   applicable   parties   named  in  Exhibit   10(af)   hereto.
          (Incorporated by reference to Exhibit 10.5 to Form 10-Q for the period
          ended December 31, 1998.)                                            *

10(ai)    Securities  Purchase  Agreement  dated as of February 2, 1999,  by and
          among  the  Company  and  the   applicable   parties  named   therein.
          (Incorporated by reference to Exhibit 10.6 to Form 10-Q for the period
          ended December 31, 1998.)                                            *

10(aj)    Registration  Rights  Agreement  dated as of February 2, 1999,  by and
          among  the  Company  and  the   applicable   parties  named   therein.
          (Incorporated by reference to Exhibit 10.7 to Form 10-Q for the period
          ended December 31, 1998.)                                            *

10(ak)    Form of Warrant to Purchase  Shares of Common  Stock of the Company at
          $.875 per share dated  February 2, 1999,  between the Company and each
          of  the   applicable   parties   named  in  Exhibit   10(aj)   hereto.
          (Incorporated by reference to Exhibit 10.8 to Form 10-Q for the period
          ended December 31, 1998.)                                            *

10(al)    Exchange  Agreement  dated as of February 19,  1999,  by and among the
          Company and the  applicable  parties named therein.  (Incorporated  by
          reference to Exhibit  10.9 to Form 10-Q for the period ended  December
          31, 1998.)                                                           *

10(am)    Form of Warrant to Purchase  50,000  shares of Common Stock of ITEC at
          $1.50 per share, dated March 5, 1999, between ITEC and Carmel Mountain
          Environmental  L.L.C.  (Incorporated  by  reference  to Exhibit 4.9 to
          Amendment No. 2 to Form S-3 filed July 16, 1999, File No. 333-77629.)*


                                      -41-
<PAGE>


10(an)    Form of Warrant to Purchase  50,000  Shares of Common Stock of ITEC at
          $1.50 per share dated March 5, 1999,  between ITEC and Carmel Mountain
          #8  Associates,  L.P.  (Incorporated  by  reference to Exhibit 4.10 to
          Amendment No. 2 to Form S-3 filed July 16, 1999, File No. 333-77629.)*

10(ao)    Lease Letter Agreement, dated March 1, 1999, by and among ITEC, Carmel
          Mountain #8 Associates,  L.P. and Carmel Mountain Environmental L.L.C.
          (Incorporated  by reference to Exhibit 4.11 to Amendment No. 2 to Form
          S-3 filed July 16, 1999, File No. 333-77629.)                        *

10(ap)    Form of Warrant to Purchase  5,000  Shares of Common  Stock of ITEC at
          $1.50 per share,  dated March 5, 1999 between ITEC and John P. Mulder.
          (Incorporated  by reference to Exhibit 4.12 to Amendment No. 2 to Form
          S-3 filed July 16, 1999, File No. 333-77629.)                        *

10(aq)    Form of Warrant to Purchase  5,000  Shares of Common  Stock of ITEC at
          $1.50 per share, dated March 5, 1999 between ITEC and Steve Tiritilli.
          (Incorporated  by reference to Exhibit 4.13 to Amendment No. 2 to Form
          S-3 filed July 16, 1999, File No. 333-77629.)                        *

10(as)    Partial  Settlement  Agreement,  dated March 30, 1999,  by and between
          ITEC and the party listed on the signature page thereto. (Incorporated
          by reference to Exhibit 4.14 to Amendment No. 2 to Form S-3 filed July
          16, 1999, File No. 333-77629.)                                       *

10(at)    Debt  Forgiveness  Agreement,  dated as of December 30,  1998,  by and
          between ITEC and Software Technology,  Inc. (Incorporated by reference
          to Exhibit  4.15 to  Amendment  No. 2 to Form S-3 filed July 16, 1999,
          File No. 333-77629.)                                                 *

10(au)    Debt  Forgiveness  Agreement,  dated as of December 30,  1998,  by and
          between ITEC and Mark A. Osman.  (Incorporated by reference to Exhibit
          4.16 to  Amendment  No. 2 to Form S-3 filed  July 16,  1999,  File No.
          333-77629.)                                                          *

10(av)    Debt  Forgiveness  Agreement,  dated as of December 30,  1998,  by and
          between ITEC and Carmine J. Bua,  III.  (Incorporated  by reference to
          Exhibit 4.17 to Amendment No. 2 to Form S-3 filed July 16, 1999,  File
          No. 333-77629.)                                                      *

10(aw)    Debt  Forgiveness  Agreement,  dated as of December 30,  1998,  by and
          between ITEC and Frank Leonardi. (incorporated by reference to Exhibit
          4.18 to  Amendment  No. 2 to Form S-3 filed  July 16,  1999,  File No.
          333-77629.)                                                          *

10(ax)    Debt  Forgiveness  Agreement,  dated as of December 30,  1998,  by and
          between  ITEC and Brian Bonar.  (Incorporated  by reference to Exhibit
          4.19 to  Amendment  No. 2 to Form S-3 filed  July 16,  1999,  File No.
          333-77629.)                                                          *

10(ay)    Debt  Forgiveness  Agreement,  dated as of December 30,  1998,  by and
          between  ITEC  and  A.L.  Dubrow,   including   assignment  of  rights
          documentation. (Incorporated by reference to Exhibit 4.20 to Amendment
          No. 2 to Form S-3 filed July 16, 1999, File No. 333-77629.)          *

10(az)    Debt  Forgiveness  Agreement,  dated as of December 30,  1998,  by and
          between  ITEC and  Frank  Kavanaugh,  including  assignment  of rights
          documentation. (Incorporated by reference to Exhibit 4.21 to Amendment
          No. 2 to Form S-3 filed July 16, 1999, File No. 333-77629.)          *

10(ba)    Debt  Forgiveness  Agreement,  dated as of December 30,  1998,  by and
          between  ITEC and Gerry Berg.  (Incorporated  by  reference to Exhibit
          4.22 to  Amendment  No. 2 to Form S-3 filed  July 16,  1999,  File No.
          333-77629.)                                                          *

10(bb)    Debt  Forgiveness  Agreement,  dated as of December 30,  1998,  by and
          between  ITEC and  Joseph  Pfeuffer.  Incorporated  by  reference  to
          Exhibit 4.23 to Amendment No. 2 to Form S-3 filed July 16, 1999,  File
          No. 333-77629.)                                                      *

10(bc)    Debt  Forgiveness  Agreement,  dated as of December 30,  1998,  by and
          between  ITEC and  Christopher  McKee  (Incorporated  by reference to
          Exhibit 4.24 to Amendment No. 2 to Form S-3 filed July 16, 1999,  File
          No. 333-77629.)                                                      *

10(bd)    Debt  Forgiveness  Agreement,  dated as of December 30,  1998,  by and
          between ITEC and David Carver.  (Incorporated  by reference to Exhibit
          4.25 to  Amendment  No. 2 to Form S-3 filed  July 16,  1999,  File No.
          333-77629.)                                                          *

10(be)    Debt  Forgiveness  Agreement,  dated as of December 30,  1998,  by and
          between  ITEC and Paul Barber.  (Incorporated  by reference to Exhibit
          4.26 to  Amendment  No. 2 to Form S-3 filed  July 16,  1999,  File No.
          333-77629.)                                                          *

10(bf)    Debt  Forgiveness  Agreement,  dated as of December 30,  1998,  by and
          between ITEC and Dale Richmond.  (Incorporated by reference to Exhibit
          4.27 to  Amendment  No. 2 to Form S-3 filed  July 16,  1999,  File No.
          333-77629.)                                                          *

10(bg)    Agreement,  dated  December 30,  1998,  by and between ITEC and Daniel
          Caldwell.  (Incorporated by reference to Exhibit 4.28 to Amendment No.
          2 to Form S-3 filed July 16, 1999, File No. 333-77629.)              *

10(bh)    Common Stock Purchase Agreement.  Incorporated by reference to Exhibit
          10.1 to the  Company's  Report  on Form  10-Q  for  the  period  ended
          September 30, 1998.                                                  *

10(bi)    Form  of  Subordinated  Note  Purchase   Agreement.   Incorporated  by
          reference to Exhibit 10.2 to the Company's Report on Form 10-Q for the
          period ended September 30, 1998.                                     *


                                      -42-
<PAGE>


10(bj)    Settlement and Mutual Release Agreement.  Incorporated by reference to
          Exhibit 10.7 to the Company's Report on Form 10-Q for the period ended
          September 30, 1998.                                                  *

10(bk)    Registration  Rights  Agreement.  Incorporated by reference to Exhibit
          10.6  to the  Company's  Report  on Form  10-Q  for the  period  ended
          September 30, 1998.                                                  *

10(bl)    Form of Convertible  Subordinated  Promissory  Note.  Incorporated  by
          reference to Exhibit 10.4 to the Company's Report on Form 10-Q for the
          period ended September 30, 1998.                                     *

10(bm)    Form of Common Stock Purchase  Warrant.  Incorporated  by reference to
          Exhibit  10.12 to the  Company's  Report on Form  10-Q for the  period
          ended September 30, 1998.                                            *

10(bn)    Form of Common Stock Purchase  Warrant.  Incorporated  by reference to
          Exhibit 10.9 to the Company's Report on Form 10-Q for the period ended
          September 30, 1998.                                                  *

10(bo)    Form of Common Stock Purchase  Warrant.  Incorporated  by reference to
          Exhibit 10.5 to the Company's Report on Form 10-Q for the period ended
          September 30, 1998.                                                  *

10(bp)    Settlement Agreement,  dated April 1999, by and between ITEC and Hiram
          French.  (Incorporated by reference to Exhibit 4.38 to Amendment No. 2
          to Form S-3 filed July 16, 1999, File No. 333-77629.)                *

10(bq)    Settlement  Agreement,  dated  April,  1999,  by and between  ITEC and
          Edward W.  Savarese.  (Incorporated  by  reference  to Exhibit 4.39 to
          Amendment No. 2 to Form S-3 filed July 16, 1999, File No. 333-77629.)*

10(br)    Form of Warrant to Purchase  60,000  Shares of Common Stock of ITEC at
          $2.50 per share, dated June 23, 1998,  between ITEC and Imperial Bank.
          (Incorporated  by reference to Exhibit 4.40 to Amendment No. 2 to Form
          S-3 filed July 16, 1999, File No. 333-77629.)                        *

10(bs)    Standard Industries/Commercial Single-Tenant Lease-Net, dated February
          22, 1999 and  addendum  thereto  dated March 5, 1999,  by and between
          Carmel  Mountain  #8  Associates,  L.P.  and  ITEC.  (Incorporated  by
          reference to Exhibit 10.10 to Form 10-Q for the period ended March 31,
          1999.)

10(bt)    1999 Special  Compensation  Plan for certain  directors,  officers and
          employees  of the  Company.  (Incorporated  by  reference to Form S-8,
          filed June 18, 1999.)                                                *

10(bu)    Form of Restated and Amended Common Stock Purchase  Warrants  relating
          to Exhibit 10(bt) above. (Incorporated by reference to Form S-8, filed
          June 18, 1999.)                                                      *

10(bv)    Form of  Compensation  Agreement  relating  to Exhibit  10(bt)  above.
          (Incorporated by reference to Form S-8, filed June 18, 1999.)        *

10(bw)    Consulting  Agreement  dated as of January  10,  1999  between  Howard
          Schraub and the Company. (Incorporated by reference to Form S-8, filed
          January 20, 1999.)

10(bx)    Consulting Agreement dated as of January 10, 1999 between George Furla
          and the Company. (Incorporated by reference to Form S-8, filed January
          20, 1999.)                                                           *

10(by)    Consulting  Agreement  dated as of January 10, 1999 between Peter Benz
          and the Company. (Incorporated by reference to Form S-8, filed January
          20, 1999.)                                                           *

10(bz)    Consulting  Agreement  dated as of November 20, 1998  between  Richard
          Kaplan and the Company.  (Incorporated by reference to Form S-8, filed
          February 22, 1999.)                                                  *

10(ca)    Consulting Agreement dated January 10, 1999 between Peter Benz and the
          Company.  (Incorporated  by reference to Form S-8,  filed February 22,
          1999.)                                                               *

10(cb)    Consulting Agreement dated June 1, 1999 between Howard Schraub and the
          Company. (Incorporated by reference to Form S-8, filed June 7, 1999.)*

10(cc)    Consulting  Agreement  dated June 1, 1999 between George Furla and the
          Company. (Incorporated by reference to Form S-8, filed June 7, 1999.)*

10(cd)    Consulting  Agreement  dated June 1, 1999  between  Peter Benz and the
          Company. (Incorporated by reference to Form S-8, filed June 7, 1999.)*

10(ce)    Consulting Agreement dated July 1, 1999 between Howard Schraub and the
          Company.  (Incorporated  by  reference  to Form S-8,  filed  August 4,
          1999.)                                                               *

10(cf)    Consulting  Agreement  dated July 1, 1999 between George Furla and the
          Company.  (Incorporated  by  reference  to Form S-8,  filed  August 4,
          1999.)                                                               *

10(cg)    Consulting  Agreement  dated July 1, 1999  between  Peter Benz and the
          Company.  (Incorporated  by  reference  to Form S-8,  filed  August 4,
          1999.)                                                               *

10(ch)    Consulting Agreement dated July 1, 1999 between Richard Kaplan and the
          Company.  (Incorporated  by  reference  to Form S-8,  filed  August 4,
          1999.)                                                               *

10(ci)    Consulting  Agreement dated July 1, 1999 between Franz Herbert and the
          Company.  (Incorporated  by  refrence  to Form S-8,  filed  August 4,
          1999.)                                                               *

10(cj)    Consulting  Agreement  dated July 1, 1999  between  Peter Benz and the
          Company.  (Incorporated  by reference to Form S-8, filed September 22,
          1999)                                                                *

10(ck)    Consulting Agreement dated July 1, 1999 between Richard Kaplan and the
          Company.  (Incorporated  by reference to Form S-8, filed September 22,
          1999)                                                               *

21        List of Subsidiaries of the Company.                                **


                                      -43-

<PAGE>

23       Consent of Independent Accountants.                                  **

27       Financial Data Sheet                                                 **


Exhibits 10(a.1),  (a.2),  (b.l), (b.2), (b.3), (d), (e.1), (e.2), (e.3), (e.4),
(f), (g.l), (g.2), (g.3), (q), (q. 1), (as),(at),  (au), (av), (aw), (ax), (ay),
(az),  (ba),  (bb),  (bc), (bd), (be), (bf), (bg), (bp), (bq), (bt), (bu), (bv),
(b2),  (bx),  (by), (bz) and (ca)-(ck) are management  contracts or compensatory
plans or arrangements.

The Company will furnish a copy of any exhibit to a requesting  stockholder upon
payment of the Company's reasonable expenses in furnishing any such exhibits.

*   Exhibit is incorporated by reference only and a copy in not included in this
    Form 10-K filing.

**  Filed herewith.


                                      -44-
<PAGE>


Exhibit 21 - Subsidiaries of the Company
----------------------------------------

1.        Prima  International,  a  California  corporation  and a  wholly-owned
          subsidiary of ITEC. (Inactive).

2.        Laser Printer Accessories  Corporation,  a Delaware  corporation and a
          wholly-owned subsidiary of ITEC (Inactive).

3.        Personal  Computer  Products,  Inc.,  a California  corporation  and a
          wholly-owned subsidiary of ITEC. (Inactive).

4.        Co-Processors,  Inc.,  a  California  corporation  and a  wholly-owned
          subsidiary of ITEC (Inactive).

5.        NewGen  Imaging  Systems,   Inc.,  a  California   corporation  and  a
          wholly-owned subsidiary of ITEC. (Inactive).

6.        Color  Solutions,  Inc., a California  corporation  and a wholly-owned
          subsidiary of ITEC. (Inactive).

7.        McMican  Corporation,  a  California  corporation  and a  wholly-owned
          subsidiary of ITEC. (Inactive).

8.        DealSeekers.com,   Incorporated,   a   Delaware   corporation   and  a
          wholly-owned subsidiary of ITEC.

9.        AMT Accel UK Ltd., located at Ritz Plaza House,  Denton Road, Milbanke
          Way, Wokingham, Berks.

10.       ITEC Europe Ltd., located at Ritz Plaza House,  Denton Road,  Milbanke
          Way, Wokingham, Berks.


                                      -45-


<PAGE>


Exhibit 23 - Consent of Independent Accountants
-----------------------------------------------

We hereby consent to the  incorporation by reference in each of the Registration
Statements on Form S-8 (No.'s 333-72957,  33-80135,  333-81033,  333-84457,  and
333-87541) and Form S-3 (No.'s 333-77629 and 333-70925) of Imaging  Technologies
Corporation  of our report dated October 11, 1999 appearing in the June 30, 1999
Annual Report of this Form 10-K.

/s/ BOROS & FARRINGTON APC
------------------------------
BOROS & FARRINGTON APC
San Diego, California
October 13, 1999


                                      -46-
<PAGE>


SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
Registrant  has duly caused this Annual  Report on Form 10-K to be signed on its
behalf by the undersigned, thereunto duly authorized.

Date:  October 13, 1999                IMAGING TECHNOLOGIES CORPORATION

                                       By:         /s/ BRIAN BONAR
                                             ----------------------------------
                                                     Brian Bonar

                                        President, Chief Executive Officer, and
                                        Acting Chief Financial Officer

POWER OF ATTORNEY
-----------------

KNOW ALL PERSONS BY THESE PRESENTS,  that each person whose  signatures  appears
below  constitutes and appoints Brian Bonar as his  attorney-in-fact,  each with
full  power  of  substitution  and  resubstitution,  for  him  in  any  and  all
capacities,  to sign any and all  amendments  to this Annual Report on Form 10-K
and to file the same,  with exhibits  thereto and other  documents in connection
therewith,  with the  Securities  and Exchange  Commission,  granting  unto said
attorneys-in-fact  full power and authority to do and perform each and every act
and thing requisite and necessary to be done in connection therewith as fully to
all intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact,  or their substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following  persons on behalf of the  Registrant and
in the capacities and on the dates indicated.

 SIGNATURE                   TITLE                                    DATE

 /s/  Harry J. Saal          Chairman of the Board of        October 13, 1999
-------------------------    Director

 /s/  Brian Bonar            President, Chief Executive,     October 13, 1999
-------------------------    Officer, Acting Chief Financial
                             Offficer and Director

 /s/  A.L. Dubrow            Director                        October 13, 1999
-------------------------

 /s/  David M. Carver        Director                        October 13, 1999
-------------------------


                                      -47-
<PAGE>
Exhibit 27.1

Financial Data Schedule

DOCUMENT
TYPE                                                 EX-27
DESCRIPTION
TEXT
ARTICLE                                                       5
CIK                                                  0000725394
NAME                           IMAGING TECHNOLOGIES CORPORATION
TABLE
[S]                                                  [C]
PERIOD TYPE                                          <Q>
FISCAL YEAR END                                      JUN-30-99
PERIOD START
PERIOD END
CASH                                                 75,000
SECURITIES                                           0
RECEIVABLES                                          1,959,000
ALLOWANCES                                           0
INVENTORY                                            552,000
CURRENT ASSETS                                       3,163,000
PP&E                                                 986,000
DEPRECIATION                                         0
TOTAL ASSETS                                         7,250,000
CURRENT LIABILITIES                                  19,682,000
BONDS                                                0
PREFERRED-MANDATORY                                  0
PREFERRED-MANDATORY                                  6,875,000
COMMON                                               110,000
OTHER-SE                                             (19,417,000)
TOTAL LIABILITY AND EQUITY                           7,250,000
SALES                                                16,417,000
TOTAL REVENUES                                       17,297,000
CGS                                                  14,064,000
TOTAL COSTS                                          40,173,000
OTHER EXPENSES                                       0
LOSS-PROVISION                                       0
INTEREST-EXPENSE                                     1,969,000
INCOME-PRETAX                                        (24,865,000)
INCOME TAX                                           (264,000)
INCOME-CONTINUING                                    0
DISCONTINUED                                         0
EXTRAORDINARY                                        0
CHANGES                                              0
NET-INCOME                                           (25,129,000)
EPS-PRIMARY                                          (1.62)
EPS-DILUTED                                          (1.62)
TABLE
TEXT
DOCUMENT
SUBMISSION