----

----

**UNITED        STATES**

**SECURITIES        AND EXCHANGE COMMISSION**

**Washington,        D.C. 20549**

**FORM        10-KSB**

| T  ANNUAL                    REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT                    OF                    1934 |
|------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                 |   |
|                                                                                                                                                 | For                    the fiscal year ended June 30, 2007 |
|                                                                                                                                                 |   |
| £  TRANSITION                    REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT                                                 |
|                                                                                                                                                 |   |
|                                                                                                                                                 | For                    the transition period from:   ______________ to                    ______________ |
|                                                                                                                                                 |   |
|                                                                                                                                                 | Commission                    file                    number:     0-28353 |

**INTEGRAL          TECHNOLOGIES, INC.**

----

| Nevada                                                                          |   | 98-0163519                                         |
|---------------------------------------------------------------------------------|--------|----------------------------------------------------|
| (State                  or other jurisdiction of incorporation or organization) |   | (IRS                  Employer Identification No.) |

| 805                  W. Orchard Drive, Suite 7, Bellingham, Washington |   | 98225                       |
|------------------------------------------------------------------------|--------|-----------------------------|
| (Address                  of principal executive offices)              |   | (Zip                  Code) |

----

**PART        I**

**CAUTIONARY        STATEMENT IDENTIFYING IMPORTANT FACTORS**

**THAT        COULD CAUSE THE COMPANY’S ACTUAL RESULTS TO**

**DIFFER        FROM THOSE PROJECTED IN FORWARD LOOKING STATEMENTS**

**DESCRIPTION        OF BUSINESS**

**BUSINESS        DEVELOPMENT**

**  **

**TECHNOLOGIES**

*ElectriPlastTM*

----

**SUMMARY        OF AGREEMENTS**

----

----

**CES        Innovations 2007 Design and Engineering Award**

**EMPLOYEES**

**SEC        REPORTS AVAILABLE ON WEBSITE**

----

**RISK        FACTORS**

**Purchase        of our stock is a highly speculative you could lose your entire        investment.**

**We        have incurred substantial losses from inception and we have never generate        substantial revenues; failure to achieve profitability in the future would        cause        the market price for our common stock to decline        significantly.**

**If        we do not generate adequate revenues in our fiscal year ending June 30, 2008,        we        may need to raise capital **
**to continue our        operations.**

**If        we are unable to compete effectively with our competitors, we will not be        successful generating revenues or attaining profits.  **

**Loss        of key personnel could cause a major disruption in our day-to-day operations        and        we could lose our relationships with third-parties with whom we do        business.**
*** ***

**If        future market**
** acceptance of our ElectriPlastTM**
**        technology is poor, we will not be able to generate adequate sales to achieve        profitable operations**

----

**Dependence        on outside suppliers and manufacturers could disrupt our business if they        fail        to meet our expectations.**

**Our        patent and other intellectual property rights may be are subject to uncertainty        and may be**
** challenged or circumvented by        competitors.  **

**The        use of our technologies could potentially conflict with the rights of        others.**

**Holders        of preferred stock have rights that are senior to the rights of holders of        common stock.**

|   | · | has                  a stated value and liquidation preference of                  $1.00; |
|--------|--------|-------------------------------------------------------------------------------------------|

|   | · | has                  a 5% annual dividend, payable in cash or shares of common                  stock; |
|--------|--------|--------------------------------------------------------------------------------------------------------|

----

|   | · | may                  be converted into shares of common stock (determined by dividing                  the                  number of shares of Series A being converted by the average of                  the high                  and low bid prices of our common stock reported by the OTC Bulletin                  Board                  over the ten trading days preceding the date of                  conversion); |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | may                  be redeemed by us within one year after issue at $1.50, after one                  year but                  less than two years at $2.00, after two years but less than three                  years at                  $2.50, after three years but less than four years at $3.00, and                  after four                  years but less than five years at                  $3.50; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | may                  be voted on all matters on an as-converted basis;                  and |
|--------|--------|---------------------------------------------------------------------------------------------|

|   | · | may                  be voted as a class on any merger, share exchange, recapitalization,                  dissolution, liquidation or change in control of our                  company. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**How        future issuances of common stock pursuant to our stock plans will affect        you.**

**We        do not expect to be able to pay cash dividends in the foreseeable future,        so you        should not make an investment in our stock if you require dividend        income.**
* *

**We        have a limited market for our common stock which causes the market price        to be        volatile and to usually decline when there is more selling than buying on        any        given day.**

**The        market price of our common stock is highly volatile and several factors that        are        beyond our control, including our common stock being historically thinly        traded,        could adversely affect its market price.**

|   | · | announcements                  of new products or sales offered by us or our                  competitors; |
|--------|--------|------------------------------------------------------------------------------------------------------------|

|   | · | actual                  or anticipated variations in quarterly operating                  results; |
|--------|--------|----------------------------------------------------------------------------------------------------|

|   | · | changes                  in financial estimates by securities analysts, if                  any; |
|--------|--------|--------------------------------------------------------------------------------------------------|

|   | · | changes                  in the market’s perception of us or the nature of our business;                  and |
|--------|--------|---------------------------------------------------------------------------------------------------------------------|

|   | · | sales                  of our common stock. |
|--------|--------|---------------------------------------------|

----

**Future        sales of common stock into the public market place will increase the public        float and may adversely **
**affect the market        price.  **

**“Penny        Stock" regulations may adversely affect your ability to resell your stock        in        market transactions.**
** **

**DESCRIPTION        OF PROPERTY**

**LEGAL        PROCEEDINGS**

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

----

**PART        II**

**MARKET        FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS**

*Market        Information*

| Quarter                  Ended      |   | Low                  Bid |   |   | High                  Bid |   |
|-------------------------------------|--------|--------------------------|--------|--------|---------------------------|--------|
|                                |   |                     |   |   |                      |   |
| September                  30, 2005 |   | $                        | 0.28   |   |                      | $      | 0.52 |   |
| December                  31, 2005  |   | $                        | 0.27   |   |                      | $      | 0.40 |   |
| March                  31, 2006     |   | $                        | 0.36   |   |                      | $      | 2.27 |   |
| June                  30, 2006      |   | $                        | 1.44   |   |                      | $      | 3.00 |   |
|                                |   |                     |   |   |                      |   |   |   |
| September                  30, 2006 |   | $                        | 2.25   |   |                      | $      | 4.15 |   |
| December                  31, 2006  |   | $                        | 1.40   |   |                      | $      | 4.25 |   |
| March                  31, 2007     |   | $                        | 2.00   |   |                      | $      | 3.81 |   |
| June                  30, 2007      |   | $                        | 1.22   |   |                      | $      | 2.74 |   |

*Holders*

*Dividends*

*Recent        Sales of Unregistered Securities*

*Repurchases        of equity securities*

----

**MANAGEMENT’S        PLAN OF OPERATION**

----

**Status        of Material Agreements with Consultants**

----

----

**FINANCIAL        STATEMENTS AND SUPPLEMENTARY DATA**

**CHANGES        IN AND DISAGREEMENTS WITH ACCOUNTANTS ON**

**ACCOUNTING        AND FINANCIAL DISCLOSURE**

**CONTROLS        AND PROCEDURES**

**Disclosure        Controls and Procedures**

**Internal        Control over Financial Reporting**

**OTHER        INFORMATION**

----

**INTEGRAL            TECHNOLOGIES, INC.**

**(A            Development Stage Company)**

**Consolidated            Financial Statements**

**June            30, 2007, 2006 and 2005**

**(US            Dollars)**

| **Index**                                                                        |   | **Page** |
|----------------------------------------------------------------------------------|--------|----------|
|                                                                             |   |     |
| **Report                      of Independent Registered Public Accounting Firm** |   | 1        |
|                                                                             |   |     |
| **Consolidated                      Financial Statements**                       |   |     |
|                                                                             |   |     |
| Consolidated                      Balance Sheets                                 |   | 2        |
|                                                                             |   |     |
| Consolidated                      Statements of Operations                       |   | 3        |
|                                                                             |   |     |
| Consolidated                      Statements of Stockholders' Equity (Deficit)   |   | 4-8      |
|                                                                             |   |     |
| Consolidated                      Statements of Cash Flows                       |   | 9        |
|                                                                             |   |     |
| Notes                      to Consolidated Financial Statements                  |   | 10-26    |

----

**REPORT            OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

**TO            THE DIRECTORS AND STOCKHOLDERS OF INTEGRAL TECHNOLOGIES,            INC.**

**(A            Development Stage Company)**

----

**INTEGRAL            TECHNOLOGIES, INC.**

**(A            Development Stage Company)**

**Consolidated            Balance Sheets**

**June            30**

**(US            Dollars) **

----

|                                                                                                                                                                                                                                                                                                                                                                                  |   | **2007** |        |   | **2006** |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------|-------------|--------|----------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                  |   |     |        |   |     |   |
| **Assets**                                                                                                                                                                                                                                                                                                                                                                            |   |     |        |   |     |   |
|                                                                                                                                                                                                                                                                                                                                                                                  |   |     |        |   |     |   |
| **Current**                                                                                                                                                                                                                                                                                                                                                                           |   |     |        |   |     |   |
| Cash                                                                                                                                                                                                                                                                                                                                                                                  |   | $        | 2,240,356   |   |     | $      | 1,496,818 |   |
| Prepaid                        expenses                                                                                                                                                                                                                                                                                                                                               |   |     | 32,442      |   |     |   | 109,045 |   |
|                                                                                                                                                                                                                                                                                                                                                                                  |   |     |        |   |     |   |   |   |
| **Total                        Assets**                                                                                                                                                                                                                                                                                                                                               |   | $        | 2,272,798   |   |     | $      | 1,605,863 |   |
|                                                                                                                                                                                                                                                                                                                                                                                  |   |     |        |   |     |   |   |   |
| **Liabilities**                                                                                                                                                                                                                                                                                                                                                                       |   |     |        |   |     |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                  |   |     |        |   |     |   |   |   |
| **Current**                                                                                                                                                                                                                                                                                                                                                                           |   |     |        |   |     |   |   |   |
| Accounts                        payable and accruals                                                                                                                                                                                                                                                                                                                                  |   | $        | 625,763     |   |     | $      | 687,603 |   |
|                                                                                                                                                                                                                                                                                                                                                                                  |   |     |        |   |     |   |   |   |
| **Total                        Liabilities**                                                                                                                                                                                                                                                                                                                                          |   |     | 625,763     |   |     |   | 687,603 |   |
|                                                                                                                                                                                                                                                                                                                                                                                  |   |     |        |   |     |   |   |   |
| **Stockholders'                        Equity**(note 3)                                                                                                                                                                                                                                                                                                                               |   |     |        |   |     |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                  |   |     |        |   |     |   |   |   |
| **Preferred                        Stock and Paid-in Capital in Excess of $0.001 Par                        Value**                         20,000,000      Shares authorized                               308,538      (2006 - 308,538) Shares                        issued and outstanding (note 3(b)) |   |     | 308,538     |   |     |   | 308,538 |   |
| **Common                        Stock and Paid-in Capital in Excess of $0.001 Par                        Value**150,000,000                             Shares authorized                          45,514,969      (2006 - 44,234,432) Shares issued                        and outstanding (note 3(a))                        |   |     | 28,762,772  |   |     |   | 22,035,483 |   |
| **Promissory                        Notes Receivable** (note 3(e))                                                                                                                                                                                                                                                                                                                    |   |     | (29,737     | )      |     |   | (32,500 | ) |
| **Other                        Comprehensive Income**                                                                                                                                                                                                                                                                                                                                 |   |     | 46,267      |   |     |   | 46,267 |   |
| **Deficit                        Accumulated During the Development Stage**                                                                                                                                                                                                                                                                                                           |   |     | (27,440,805 | )      |     |   | (21,439,528 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                  |   |     |        |   |     |   |   |   |
| **Total                        Stockholders' Equity**                                                                                                                                                                                                                                                                                                                                 |   |     | 1,647,035   |   |     |   | 918,260 |   |
|                                                                                                                                                                                                                                                                                                                                                                                  |   |     |        |   |     |   |   |   |
| **Total                        Liabilities and Stockholders' Equity**                                                                                                                                                                                                                                                                                                                 |   | $        | 2,272,798   |   |     | $      | 1,605,863 |   |

----

**INTEGRAL            TECHNOLOGIES, INC.**

**(A            Development Stage Company)**

**Consolidated            Statements of Operations**

**(US            Dollars) **

----

|                                                                                                          |   |                                          |       |   |        |   |       |     |   |   | **Period                      From**   |   |
|---------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------|------------|--------|-------------|--------|------------|----------|--------|--------|----------------------------------------|--------|
|                                                                                                          |   |                                          |       |   |        |   |       |     |   |   | **February                      12,**  |   |
|                                                                                                          |   |                                          |       |   |        |   |       |     |   |   | **1996**                               |   |
|                                                                                                          |   |                                          |       |   |        |   |       |     |   |   | **(Inception)**                        |   |
|                                                                                                          |   | **Years                      Ended June 30,** |       |   | **Through** |   |
|                                                                                                          |   | **2007**                                      |       |   | **2006**    |   |       | **2005** |   |   | **June                      30, 2007** |   |
|                                                                                                          |   |                                          |       |   |        |   |       |     |   |   |                                   |   |
| **Revenues**                                                                                                  |   | $                                             | 0          |   |        | $      | 0          |     |   | $      | 11,158                                 |   |   | $ | 249,308 |   |
| **Cost                      of Sales**                                                                        |   |                                          | 0          |   |        |   | 0          |     |   |   | 0                                      |   |   |   | 216,016 |   |
|                                                                                                          |   |                                          |       |   |        |   |       |     |   |   |                                   |   |   |   |   |   |
|                                                                                                          |   |                                          | 0          |   |        |   | 0          |     |   |   | 11,158                                 |   |   |   | 33,292 |   |
| **Other                      Income**                                                                         |   |                                          | 138,720    |   |        |   | 2,096      |     |   |   | 55,462                                 |   |   |   | 799,121 |   |
|                                                                                                          |   |                                          |       |   |        |   |       |     |   |   |                                   |   |   |   |   |   |
|                                                                                                          |   |                                          | 138,720    |   |        |   | 2,096      |     |   |   | 66,620                                 |   |   |   | 832,413 |   |
|                                                                                                          |   |                                          |       |   |        |   |       |     |   |   |                                   |   |   |   |   |   |
| **Expenses**                                                                                                  |   |                                          |       |   |        |   |       |     |   |   |                                   |   |   |   |   |   |
| Salaries                      (note 3(c))                                                                     |   |                                          | 3,335,225  |   |        |   | 602,741    |     |   |   | 588,930                                |   |   |   | 8,468,367 |   |
| Consulting                      (note 3(c))                                                                   |   |                                          | 2,006,943  |   |        |   | 718,025    |     |   |   | 346,339                                |   |   |   | 5,763,552 |   |
| Legal                      and accounting                                                                     |   |                                          | 324,284    |   |        |   | 456,911    |     |   |   | 967,581                                |   |   |   | 3,834,343 |   |
| Travel                      and entertainment                                                                 |   |                                          | 124,930    |   |        |   | 98,385     |     |   |   | 107,069                                |   |   |   | 1,207,184 |   |
| General                      and administrative                                                               |   |                                          | 119,043    |   |        |   | 113,539    |     |   |   | 154,338                                |   |   |   | 1,016,934 |   |
| Research                      and development                                                                 |   |                                          | 106,335    |   |        |   | 0          |     |   |   | (397,296                               | )      |   |   | 953,794 |   |
| Rent                                                                                                          |   |                                          | 40,486     |   |        |   | 37,290     |     |   |   | 32,816                                 |   |   |   | 397,841 |   |
| Telephone                                                                                                     |   |                                          | 38,442     |   |        |   | 41,268     |     |   |   | 29,312                                 |   |   |   | 404,697 |   |
| Bank                      charges and interest, net                                                           |   |                                          | 17,878     |   |        |   | 4,895      |     |   |   | 9,264                                  |   |   |   | 195,266 |   |
| Advertising                                                                                                   |   |                                          | 11,004     |   |        |   | 25,511     |     |   |   | 17,500                                 |   |   |   | 331,270 |   |
| Write-off                      of investments                                                                 |   |                                          | 0          |   |        |   | 0          |     |   |   | 1                                      |   |   |   | 1,250,000 |   |
| Non-competition                      agreement                                                                |   |                                          | 0          |   |        |   | 0          |     |   |   | 0                                      |   |   |   | 711,000 |   |
| Write-down                      of license and operating assets                                               |   |                                          | 0          |   |        |   | 0          |     |   |   | 0                                      |   |   |   | 1,855,619 |   |
| Interest                      on beneficial conversion feature                                                |   |                                          | 0          |   |        |   | 0          |     |   |   | 0                                      |   |   |   | 566,455 |   |
| Bad                      debts                                                                                |   |                                          | 0          |   |        |   | 0          |     |   |   | 0                                      |   |   |   | 52,613 |   |
| Settlement                      of lawsuit                                                                    |   |                                          | 0          |   |        |   | 0          |     |   |   | 0                                      |   |   |   | 45,250 |   |
| Financing                      fees                                                                           |   |                                          | 0          |   |        |   | (499       | )        |   |   | 0                                      |   |   |   | 129,043 |   |
| Depreciation                      and amortization                                                            |   |                                          | 0          |   |        |   | 8,219      |     |   |   | 23,031                                 |   |   |   | 324,386 |   |
|                                                                                                          |   |                                          |       |   |        |   |       |     |   |   |                                   |   |   |   |   |   |
|                                                                                                          |   |                                          | 6,124,570  |   |        |   | 2,106,285  |     |   |   | 1,878,885                              |   |   |   | 27,507,614 |   |
|                                                                                                          |   |                                          |       |   |        |   |       |     |   |   |                                   |   |   |   |   |   |
| **Net                      Loss**                                                                             |   | $                                             | (5,985,850 | )      |        | $      | (2,104,189 | )        |   | $      | (1,812,265                             | )      |   | $ | (26,675,201 | ) |
|                                                                                                          |   |                                          |       |   |        |   |       |     |   |   |                                   |   |   |   |   |   |
| **Loss                      Per Common Share** (note 7)                                                       |   | $                                             | (0.13      | )      |        | $      | (0.05      | )        |   | $      | (0.04                                  | )      |   |   |   |   |
|                                                                                                          |   |                                          |       |   |        |   |       |     |   |   |                                   |   |   |   |   |   |
| **Weighted                      Average Number of  Common Shares                      Outstanding** |   |                                          | 45,230,171 |   |        |   | 42,814,988 |     |   |   | 40,490,001                             |   |   |   |   |   |

----

**INTEGRAL            TECHNOLOGIES, INC.**

**(A            Development Stage Company)**

**Consolidated            Statements of Stockholders' Equity (Deficit)**

**(US            Dollars) **

----

|                                                                    |   | **Shares****of                      Common****Stock****Issued** |       |   | **Common****Stock                      and****Paid-in                      Capital****in                      Excess****of                      Par** |   |      | **Shares                      of****Preferred****Stock****Issued** |   |   | **Preferred****Stock                      and****Paid-in                      Capital****in                      Excess****of                      Par** |   |   | **Promissory****Notes****Receivable** |   |   | **Share****Subscriptions** |   |   | **Other****Comprehensive****Income** |   |   | **Deficit****Accumulated****During                      the****Development****Stage** |   |   | **Total****Stockholders'****Equity                      (Deficit)** |   |
|-------------------------------------------------------------------------|--------|-----------------------------------------------------------------|------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------|--------------------------------------------------------------------|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------------------------------------|--------|--------|----------------------------|--------|--------|--------------------------------------|--------|--------|---------------------------------------------------------------------------------------|--------|--------|---------------------------------------------------------------------|--------|
|                                                                    |   |                                                            |       |   |                                                                                                                                                  |   |      |                                                               |   |   |                                                                                                                                                     |   |   |                                  |   |   |                       |   |   |                                 |   |   |                                                                                  |   |   |                                                                |   |
| **Shares                      Issued for**                              |   |                                                            |       |   |                                                                                                                                                  |   |      |                                                               |   |   |                                                                                                                                                     |   |   |                                  |   |   |                       |   |   |                                 |   |   |                                                                                  |   |   |                                                                |   |
| Cash                                                                    |   |                                                            | 1,000,000  |   |                                                                                                                                                  | $      | 10,000    |                                                               |   |   | 0                                                                                                                                                        |   |   | $                                     | 0      |   |                       | $      | 0      |                                 |   | $      | 0                                                                                     |   |   | $                                                                   | 0      |   |   | $ | 0 |   |   | $ | 10,000 |   |
| Property                      and equipment (to officers and directors) |   |                                                            | 1,500,000  |   |                                                                                                                                                  |   | 15,000    |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0      |   |                       |   | 0      |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | 15,000 |   |
| Services                      (provided by officers and directors)      |   |                                                            | 2,000,000  |   |                                                                                                                                                  |   | 20,000    |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0      |   |                       |   | 0      |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | 20,000 |   |
| Services                      (others)                                  |   |                                                            | 1,500,000  |   |                                                                                                                                                  |   | 15,000    |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0      |   |                       |   | 0      |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | 15,000 |   |
| Foreign                      currency translation                       |   |                                                            | 0          |   |                                                                                                                                                  |   | 0         |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0      |   |                       |   | 0      |                                 |   |   | 0                                                                                     |   |   |                                                                | (1,226 | ) |   |   | 0 |   |   |   | (1,226 | ) |
| Net                      loss for period                                |   |                                                            | 0          |   |                                                                                                                                                  |   | 0         |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0      |   |                       |   | 0      |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | (344,843 | ) |   |   | (344,843 | ) |
|                                                                    |   |                                                            |       |   |                                                                                                                                                  |   |      |                                                               |   |   |                                                                                                                                                     |   |   |                                  |   |   |                       |   |   |                                 |   |   |                                                                                  |   |   |                                                                |   |   |   |   |   |   |   |   |   |   |
| **Balance,                      June 30, 1996**                    |   |                                                            | 6,000,000  |   |                                                                                                                                                  |   | 60,000    |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0      |   |                       |   | 0      |                                 |   |   | 0                                                                                     |   |   |                                                                | (1,226 | ) |   |   | (344,843 | ) |   |   | (286,069 | ) |
| **Shares                      Issued for**                              |   |                                                            |       |   |                                                                                                                                                  |   |      |                                                               |   |   |                                                                                                                                                     |   |   |                                  |   |   |                       |   |   |                                 |   |   |                                                                                  |   |   |                                                                |   |   |   |   |   |   |   |   |   |   |
| Cash                                                                    |   |                                                            | 5,086,000  |   |                                                                                                                                                  |   | 865,514   |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0      |   |                       |   | 0      |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | 865,514 |   |
| Share                      issue costs                                  |   |                                                            | 0          |   |                                                                                                                                                  |   | (48,920   | )                                                                  |   |   | 0                                                                                                                                                        |   |   |                                  | 0      |   |                       |   | 0      |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | (48,920 | ) |
| Services                                                                |   |                                                            | 564,000    |   |                                                                                                                                                  |   | 63,036    |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0      |   |                       |   | 0      |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | 63,036 |   |
| Acquisition                      of subsidiary                          |   |                                                            | 100,000    |   |                                                                                                                                                  |   | 275,000   |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0      |   |                       |   | 0      |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | 275,000 |   |
| Foreign                      currency translation                       |   |                                                            | 0          |   |                                                                                                                                                  |   | 0         |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0      |   |                       |   | 0      |                                 |   |   | 0                                                                                     |   |   |                                                                | 12,601 |   |   |   | 0 |   |   |   | 12,601 |   |
| Net                      loss for year                                  |   |                                                            | 0          |   |                                                                                                                                                  |   | 0         |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0      |   |                       |   | 0      |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | (822,217 | ) |   |   | (822,217 | ) |
|                                                                    |   |                                                            |       |   |                                                                                                                                                  |   |      |                                                               |   |   |                                                                                                                                                     |   |   |                                  |   |   |                       |   |   |                                 |   |   |                                                                                  |   |   |                                                                |   |   |   |   |   |   |   |   |   |   |
| **Balance,                      June 30, 1997**                    |   |                                                            | 11,750,000 |   |                                                                                                                                                  |   | 1,214,630 |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0      |   |                       |   | 0      |                                 |   |   | 0                                                                                     |   |   |                                                                | 11,375 |   |   |   | (1,167,060 | ) |   |   | 58,945 |   |
| **Shares                      Issued for**                              |   |                                                            |       |   |                                                                                                                                                  |   |      |                                                               |   |   |                                                                                                                                                     |   |   |                                  |   |   |                       |   |   |                                 |   |   |                                                                                  |   |   |                                                                |   |   |   |   |   |   |   |   |   |   |
| Cash                                                                    |   |                                                            | 825,396    |   |                                                                                                                                                  |   | 650,000   |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0      |   |                       |   | 0      |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | 650,000 |   |
| Share                      issue costs                                  |   |                                                            | 0          |   |                                                                                                                                                  |   | (78,000   | )                                                                  |   |   | 0                                                                                                                                                        |   |   |                                  | 0      |   |                       |   | 0      |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | (78,000 | ) |
| Foreign                      currency translation                       |   |                                                            | 0          |   |                                                                                                                                                  |   | 0         |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0      |   |                       |   | 0      |                                 |   |   | 0                                                                                     |   |   |                                                                | 24,860 |   |   |   | 0 |   |   |   | 24,860 |   |
| Net                      loss for year                                  |   |                                                            | 0          |   |                                                                                                                                                  |   | 0         |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0      |   |                       |   | 0      |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | (937,373 | ) |   |   | (937,373 | ) |
|                                                                    |   |                                                            |       |   |                                                                                                                                                  |   |      |                                                               |   |   |                                                                                                                                                     |   |   |                                  |   |   |                       |   |   |                                 |   |   |                                                                                  |   |   |                                                                |   |   |   |   |   |   |   |   |   |   |
| **Balance,                      June 30, 1998**                    |   |                                                            | 12,575,396 |   |                                                                                                                                                  | $      | 1,786,630 |                                                               |   |   | 0                                                                                                                                                        |   |   | $                                     | 0      |   |                       | $      | 0      |                                 |   | $      | 0                                                                                     |   |   | $                                                                   | 36,235 |   |   | $ | (2,104,433 | ) |   | $ | (281,568 | ) |

----

**INTEGRAL            TECHNOLOGIES, INC.**

**(A            Development Stage Company)**

**Consolidated            Statements of Stockholders' Equity (Deficit)**

**(US            Dollars) **

----

|                                                               |   | **Shares                      of****Common****Stock****Issued** |       |   | **Common****Stock                      and****Paid-in                      Capital****in                      Excess****of                      Par** |   |      | **Shares                      of****Preferred****Stock****Issued** |   |   | **Preferred****Stock                      and****Paid-in                      Capital****in                      Excess****of                      Par** |   |   | **Promissory****Notes****Receivable** |    |   | **Share****Subscriptions** |   |     | **Other****Comprehensive****Income** |   |   | **Deficit****Accumulated****During                      the****Development****Stage** |   |   | **Total****Stockholders'****Equity                      (Deficit)** |   |
|--------------------------------------------------------------------|--------|-----------------------------------------------------------------|------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------|--------------------------------------------------------------------|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------------------------------------|---------|--------|----------------------------|--------|----------|--------------------------------------|--------|--------|---------------------------------------------------------------------------------------|--------|--------|---------------------------------------------------------------------|--------|
|                                                               |   |                                                            |       |   |                                                                                                                                                  |   |      |                                                               |   |   |                                                                                                                                                     |   |   |                                  |    |   |                       |   |     |                                 |   |   |                                                                                  |   |   |                                                                |   |
| **Balance,                      June 30, 1998**               |   |                                                            | 12,575,396 |   |                                                                                                                                                  | $      | 1,786,630 |                                                               |   |   | 0                                                                                                                                                        |   |   | $                                     | 0       |   |                       | $      | 0        |                                 |   | $      | 0                                                                                     |   |   | $                                                                   | 36,235 |   |   | $ | (2,104,433 | ) |   | $ | (281,568 | ) |
| **Shares                      Issued for**                         |   |                                                            |       |   |                                                                                                                                                  |   |      |                                                               |   |   |                                                                                                                                                     |   |   |                                  |    |   |                       |   |     |                                 |   |   |                                                                                  |   |   |                                                                |   |   |   |   |   |   |   |   |   |   |
| Cash                                                               |   |                                                            | 200,000    |   |                                                                                                                                                  |   | 50,000    |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0       |   |                       |   | 0        |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | 50,000 |   |
| Exercise                      of stock options                     |   |                                                            | 445,000    |   |                                                                                                                                                  |   | 80,500    |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0       |   |                       |   | 0        |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | 80,500 |   |
| Promissory                      note                               |   |                                                            | 1,683,789  |   |                                                                                                                                                  |   | 252,568   |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0       |   |                       |   | (284,068 | )                                    |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | (31,500 | ) |
| Settlement                      of lawsuit                         |   |                                                            | 150,000    |   |                                                                                                                                                  |   | 15,000    |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0       |   |                       |   | 0        |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | 15,000 |   |
| Services                      (provided by officers and directors) |   |                                                            | 666,666    |   |                                                                                                                                                  |   | 100,000   |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0       |   |                       |   | 0        |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | 100,000 |   |
| Share                      issue costs                             |   |                                                            | 0          |   |                                                                                                                                                  |   | (100,500  | )                                                                  |   |   | 0                                                                                                                                                        |   |   |                                  | 0       |   |                       |   | 0        |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | (100,500 | ) |
| Services                                                           |   |                                                            | 250,000    |   |                                                                                                                                                  |   | 50,000    |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0       |   |                       |   | 0        |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | 50,000 |   |
| Conversion                      of convertible debentures          |   |                                                            | 3,869,120  |   |                                                                                                                                                  |   | 525,813   |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0       |   |                       |   | 0        |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | 525,813 |   |
| Acquisition                      of subsidiary                     |   |                                                            | 1,800,000  |   |                                                                                                                                                  |   | 619,200   |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0       |   |                       |   | 0        |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | 619,200 |   |
| Held                      in escrow                                |   |                                                            | 447,091    |   |                                                                                                                                                  |   | 0         |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0       |   |                       |   | 0        |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | 0 |   |
| Stock                      option benefit                          |   |                                                            | 0          |   |                                                                                                                                                  |   | 70,600    |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0       |   |                       |   | 0        |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | 70,600 |   |
| Beneficial                      conversion feature                 |   |                                                            | 0          |   |                                                                                                                                                  |   | 566,456   |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0       |   |                       |   | 0        |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | 566,456 |   |
| Foreign                      currency translation                  |   |                                                            | 0          |   |                                                                                                                                                  |   | 0         |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0       |   |                       |   | 0        |                                 |   |   | 0                                                                                     |   |   |                                                                | 8,444  |   |   |   | 0 |   |   |   | 8,444 |   |
| Net                      loss for year                             |   |                                                            | 0          |   |                                                                                                                                                  |   | 0         |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0       |   |                       |   | 0        |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | (1,404,021 | ) |   |   | (1,404,021 | ) |
|                                                               |   |                                                            |       |   |                                                                                                                                                  |   |      |                                                               |   |   |                                                                                                                                                     |   |   |                                  |    |   |                       |   |     |                                 |   |   |                                                                                  |   |   |                                                                |   |   |   |   |   |   |   |   |   |   |
| **Balance                      June 30, 1999**                |   |                                                            | 22,087,062 |   |                                                                                                                                                  |   | 4,016,267 |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0       |   |                       |   | (284,068 | )                                    |   |   | 0                                                                                     |   |   |                                                                | 44,679 |   |   |   | (3,508,454 | ) |   |   | 268,424 |   |
| **Shares                      Issued for**                         |   |                                                            |       |   |                                                                                                                                                  |   |      |                                                               |   |   |                                                                                                                                                     |   |   |                                  |    |   |                       |   |     |                                 |   |   |                                                                                  |   |   |                                                                |   |   |   |   |   |   |   |   |   |   |
| Cash                      on private placement                     |   |                                                            | 2,650,000  |   |                                                                                                                                                  |   | 3,975,000 |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0       |   |                       |   | 0        |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | 3,975,000 |   |
| Exercise                      of options                           |   |                                                            | 1,245,000  |   |                                                                                                                                                  |   | 256,700   |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0       |   |                       |   | 0        |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | 256,700 |   |
| Services                                                           |   |                                                            | 50,000     |   |                                                                                                                                                  |   | 13,000    |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0       |   |                       |   | 0        |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | 13,000 |   |
| Settlement                      of debt                            |   |                                                            | 0          |   |                                                                                                                                                  |   | 0         |                                                               |   |   | 664,410                                                                                                                                                  |   |   |                                  | 664,410 |   |                       |   | 0        |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | 664,410 |   |
| Shares                      released from escrow                   |   |                                                            | 0          |   |                                                                                                                                                  |   | 75,558    |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0       |   |                       |   | 0        |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | 75,558 |   |
| Stock                      option benefit                          |   |                                                            | 0          |   |                                                                                                                                                  |   | 48,256    |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0       |   |                       |   | 0        |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | 48,256 |   |
| Promissory                      note repayment                     |   |                                                            | 0          |   |                                                                                                                                                  |   | 0         |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0       |   |                       |   | 225,568  |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | 225,568 |   |
| Foreign                      currency translation                  |   |                                                            | 0          |   |                                                                                                                                                  |   | 0         |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0       |   |                       |   | 0        |                                 |   |   | 0                                                                                     |   |   |                                                                | 1,614  |   |   |   | 0 |   |   |   | 1,614 |   |
| Net                      loss for year                             |   |                                                            | 0          |   |                                                                                                                                                  |   | 0         |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0       |   |                       |   | 0        |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | (1,537,402 | ) |   |   | (1,537,402 | ) |
|                                                               |   |                                                            |       |   |                                                                                                                                                  |   |      |                                                               |   |   |                                                                                                                                                     |   |   |                                  |    |   |                       |   |     |                                 |   |   |                                                                                  |   |   |                                                                |   |   |   |   |   |   |   |   |   |   |
| **Balance,                      June 30, 2000**               |   |                                                            | 26,032,062 |   |                                                                                                                                                  | $      | 8,384,781 |                                                               |   |   | 664,410                                                                                                                                                  |   |   | $                                     | 664,410 |   |                       | $      | (58,500  | )                                    |   | $      | 0                                                                                     |   |   | $                                                                   | 46,293 |   |   | $ | (5,045,856 | ) |   | $ | 3,991,128 |   |

----

**INTEGRAL            TECHNOLOGIES, INC.**

**(A            Development Stage Company)**

**Consolidated            Statements of Stockholders' Equity (Deficit)**

**(US            Dollars) **

----

|                                                                   |   | **Shares****of                      Common****Stock****Issued** |       |   | **Common****Stock                      and****Paid                      in Capital****in                      Excess****of                      Par** |   |       | **Shares                      of****Preferred****Stock****Issued** |   |   | **Preferred****Stock                      and****Paid-                      in Capital****in                      Excess****of                      Par** |   |   | **Promissory****Notes****Receivable** |     |   | **Share****Subscriptions** |   |    | **Other****Comprehensive****Income** |   |   | **Deficit****Accumulated****During                      the****Development****Stage** |   |   | **Total****Stockholders'****Equity                      (Deficit)** |   |
|------------------------------------------------------------------------|--------|-----------------------------------------------------------------|------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------|--------------------------------------------------------------------|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------------------------------------|----------|--------|----------------------------|--------|---------|--------------------------------------|--------|--------|---------------------------------------------------------------------------------------|--------|--------|---------------------------------------------------------------------|--------|
|                                                                   |   |                                                            |       |   |                                                                                                                                                  |   |       |                                                               |   |   |                                                                                                                                                      |   |   |                                  |     |   |                       |   |    |                                 |   |   |                                                                                  |   |   |                                                                |   |
| **Balance,                      June 30, 2000**                   |   |                                                            | 26,032,062 |   |                                                                                                                                                  | $      | 8,384,781  |                                                               |   |   | 664,410                                                                                                                                                   |   |   | $                                     | 664,410  |   |                       | $      | (58,500 | )                                    |   | $      | 0                                                                                     |   |   | $                                                                   | 46,293 |   |   | $ | (5,045,856 | ) |   | $ | 3,991,128 |   |
| **Shares                      Issued for**                             |   |                                                            |       |   |                                                                                                                                                  |   |       |                                                               |   |   |                                                                                                                                                      |   |   |                                  |     |   |                       |   |    |                                 |   |   |                                                                                  |   |   |                                                                |   |   |   |   |   |   |   |   |   |   |
|   Cash                      on private placement             |   |                                                            | 81,885     |   |                                                                                                                                                  |   | 112,480    |                                                               |   |   | 0                                                                                                                                                         |   |   |                                  | 0        |   |                       |   | 0       |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | 112,480 |   |
|   Exercise                      of options                   |   |                                                            | 517,000    |   |                                                                                                                                                  |   | 91,515     |                                                               |   |   | 0                                                                                                                                                         |   |   |                                  | 0        |   |                       |   | 0       |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | 91,515 |   |
|   Services                                                   |   |                                                            | 100,000    |   |                                                                                                                                                  |   | 40,000     |                                                               |   |   | 0                                                                                                                                                         |   |   |                                  | 0        |   |                       |   | 0       |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | 40,000 |   |
|   Held                      in escrow                        |   |                                                            | 218,115    |   |                                                                                                                                                  |   | 0          |                                                               |   |   | 0                                                                                                                                                         |   |   |                                  | 0        |   |                       |   | 0       |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | 0 |   |
| Stock                      option benefit                              |   |                                                            | 0          |   |                                                                                                                                                  |   | 272,207    |                                                               |   |   | 0                                                                                                                                                         |   |   |                                  | 0        |   |                       |   | 0       |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | 272,207 |   |
| Dividends                      on preferred shares                     |   |                                                            | 0          |   |                                                                                                                                                  |   | 0          |                                                               |   |   | 0                                                                                                                                                         |   |   |                                  | 0        |   |                       |   | 0       |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | (30,720 | ) |   |   | (30,720 | ) |
| Share                      subscriptions                               |   |                                                            | 0          |   |                                                                                                                                                  |   | 0          |                                                               |   |   | 0                                                                                                                                                         |   |   |                                  | 0        |   |                       |   | 0       |                                 |   |   | 50,000                                                                                |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | 50,000 |   |
| Redeemed                      shares                                   |   |                                                            | 0          |   |                                                                                                                                                  |   | 0          |                                                               |   |   | (100,000                                                                                                                                                  | )      |   |                                  | (100,000 | )      |                       |   | 0       |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | (100,000 | ) |   |   | (200,000 | ) |
| Foreign                      currency translation                      |   |                                                            | 0          |   |                                                                                                                                                  |   | 0          |                                                               |   |   | 0                                                                                                                                                         |   |   |                                  | 0        |   |                       |   | 0       |                                 |   |   | 0                                                                                     |   |   |                                                                | (26    | ) |   |   | 0 |   |   |   | (26 | ) |
| Net                      loss for year                                 |   |                                                            | 0          |   |                                                                                                                                                  |   | 0          |                                                               |   |   | 0                                                                                                                                                         |   |   |                                  | 0        |   |                       |   | 0       |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | (4,000,169 | ) |   |   | (4,000,169 | ) |
|                                                                   |   |                                                            |       |   |                                                                                                                                                  |   |       |                                                               |   |   |                                                                                                                                                      |   |   |                                  |     |   |                       |   |    |                                 |   |   |                                                                                  |   |   |                                                                |   |   |   |   |   |   |   |   |   |   |
| **Balance,                      June 30, 2001**                   |   |                                                            | 26,949,062 |   |                                                                                                                                                  |   | 8,900,983  |                                                               |   |   | 564,410                                                                                                                                                   |   |   |                                  | 564,410  |   |                       |   | (58,500 | )                                    |   |   | 50,000                                                                                |   |   |                                                                | 46,267 |   |   |   | (9,176,745 | ) |   |   | 326,415 |   |
| **Shares                      Issued for**                             |   |                                                            |       |   |                                                                                                                                                  |   |       |                                                               |   |   |                                                                                                                                                      |   |   |                                  |     |   |                       |   |    |                                 |   |   |                                                                                  |   |   |                                                                |   |   |   |   |   |   |   |   |   |   |
|   Proprietary                      non-competition agreement |   |                                                            | 450,000    |   |                                                                                                                                                  |   | 711,000    |                                                               |   |   | 0                                                                                                                                                         |   |   |                                  | 0        |   |                       |   | 0       |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | 711,000 |   |
|   Held                      in escrow                        |   |                                                            | 700,000    |   |                                                                                                                                                  |   | 0          |                                                               |   |   | 0                                                                                                                                                         |   |   |                                  | 0        |   |                       |   | 0       |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | 0 |   |
|   Exercise                      of options                   |   |                                                            | 2,263,500  |   |                                                                                                                                                  |   | 971,200    |                                                               |   |   | 0                                                                                                                                                         |   |   |                                  | 0        |   |                       |   | (15,000 | )                                    |   |   | (10,000                                                                               | )      |   |                                                                | 0      |   |   |   | 0 |   |   |   | 946,200 |   |
|   Exercise                      of warrants                  |   |                                                            | 325,000    |   |                                                                                                                                                  |   | 130,000    |                                                               |   |   | 0                                                                                                                                                         |   |   |                                  | 0        |   |                       |   | 0       |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | 130,000 |   |
|   Subscriptions                                              |   |                                                            | 100,000    |   |                                                                                                                                                  |   | 40,000     |                                                               |   |   | 0                                                                                                                                                         |   |   |                                  | 0        |   |                       |   | 0       |                                 |   |   | (40,000                                                                               | )      |   |                                                                | 0      |   |   |   | 0 |   |   |   | 0 |   |
| Stock                      option compensation                         |   |                                                            | 0          |   |                                                                                                                                                  |   | 415,685    |                                                               |   |   | 0                                                                                                                                                         |   |   |                                  | 0        |   |                       |   | 0       |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | 415,685 |   |
| Shares                      released from escrow                       |   |                                                            | 0          |   |                                                                                                                                                  |   | 954,582    |                                                               |   |   | 0                                                                                                                                                         |   |   |                                  | 0        |   |                       |   | 0       |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | 954,582 |   |
| Dividends                      on preferred shares                     |   |                                                            | 0          |   |                                                                                                                                                  |   | 0          |                                                               |   |   | 0                                                                                                                                                         |   |   |                                  | 0        |   |                       |   | 0       |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | (26,087 | ) |   |   | (26,087 | ) |
| Redeemed                      shares                                   |   |                                                            | 0          |   |                                                                                                                                                  |   | 0          |                                                               |   |   | (124,800                                                                                                                                                  | )      |   |                                  | (124,800 | )      |                       |   | 0       |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | (187,200 | ) |   |   | (312,000 | ) |
| Write-off                      of promissory note receivable           |   |                                                            | 0          |   |                                                                                                                                                  |   | (7,000     | )                                                                  |   |   | 0                                                                                                                                                         |   |   |                                  | 0        |   |                       |   | 7,000   |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | 0 |   |
| Net                      loss for year                                 |   |                                                            | 0          |   |                                                                                                                                                  |   | 0          |                                                               |   |   | 0                                                                                                                                                         |   |   |                                  | 0        |   |                       |   | 0       |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | (3,836,191 | ) |   |   | (3,836,191 | ) |
|                                                                   |   |                                                            |       |   |                                                                                                                                                  |   |       |                                                               |   |   |                                                                                                                                                      |   |   |                                  |     |   |                       |   |    |                                 |   |   |                                                                                  |   |   |                                                                |   |   |   |   |   |   |   |   |   |   |
| **Balance,                      June 30, 2002**                   |   |                                                            | 30,787,562 |   |                                                                                                                                                  | $      | 12,116,450 |                                                               |   |   | 439,610                                                                                                                                                   |   |   | $                                     | 439,610  |   |                       | $      | (66,500 | )                                    |   | $      | 0                                                                                     |   |   | $                                                                   | 46,267 |   |   | $ | (13,226,223 | ) |   | $ | (690,396 | ) |

----

**INTEGRAL            TECHNOLOGIES, INC.**

**(A            Development Stage Company)**

**Consolidated            Statements of Stockholders' Equity (Deficit)**

**(US            Dollars) **

----

|                                                                         |   | **Shares****of                      Common****Stock****Issued** |       |   | **Common****Stock                      and****Paid-in                      Capital****in                      Excess****of                      Par** |   |       | **Shares                      of****Preferred****Stock****Issued** |   |   | **Preferred****Stock                      and****Paid                      in-Capital****in                      Excess****of                      Par** |   |   | **Promissory****Notes****Receivable** |     |   | **Share****Subscriptions** |   |    | **Other****Comprehensive****Income** |   |   | **Deficit****Accumulated****During                      the****Development****Stage** |   |   | **Total****Stockholders'****Equity                      (Deficit)** |   |
|------------------------------------------------------------------------------|--------|-----------------------------------------------------------------|------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------|--------------------------------------------------------------------|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------------------------------------|----------|--------|----------------------------|--------|---------|--------------------------------------|--------|--------|---------------------------------------------------------------------------------------|--------|--------|---------------------------------------------------------------------|--------|
|                                                                         |   |                                                            |       |   |                                                                                                                                                  |   |       |                                                               |   |   |                                                                                                                                                     |   |   |                                  |     |   |                       |   |    |                                 |   |   |                                                                                  |   |   |                                                                |   |
| **Balance,                      June 30, 2002**                         |   |                                                            | 30,787,562 |   |                                                                                                                                                  | $      | 12,116,450 |                                                               |   |   | 439,610                                                                                                                                                  |   |   | $                                     | 439,610  |   |                       | $      | (66,500 | )                                    |   | $      | 0                                                                                     |   |   | $                                                                   | 46,267 |   |   | $ | (13,226,223 | ) |   | $ | (690,396 | ) |
| **Shares                      Issued for**                                   |   |                                                            |       |   |                                                                                                                                                  |   |       |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  |     |   |                       |   |    |                                 |   |   |                                                                                  |   |   |                                                                |   |   |   |   |   |   |   |   |   |   |
| Cash                      on private placement                               |   |                                                            | 1,684,000  |   |                                                                                                                                                  |   | 842,050    |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0        |   |                       |   | 0       |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | 842,050 |   |
| Settlement                      of debt                                      |   |                                                            | 144,793    |   |                                                                                                                                                  |   | 104,542    |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0        |   |                       |   | 0       |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | 104,542 |   |
| Services                                                                     |   |                                                            | 200,000    |   |                                                                                                                                                  |   | 196,000    |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0        |   |                       |   | 0       |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | 196,000 |   |
| Exercise                      of options                                     |   |                                                            | 52,500     |   |                                                                                                                                                  |   | 43,750     |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0        |   |                       |   | 0       |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | 43,750 |   |
| Exercise                      of warrants                                    |   |                                                            | 55,000     |   |                                                                                                                                                  |   | 27,500     |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0        |   |                       |   | 0       |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | 27,500 |   |
| Subscription                      received                                   |   |                                                            | 0          |   |                                                                                                                                                  |   | 0          |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0        |   |                       |   | 0       |                                 |   |   | 176,665                                                                               |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | 176,665 |   |
| Stock                      option compensation                               |   |                                                            | 0          |   |                                                                                                                                                  |   | 5,460      |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0        |   |                       |   | 0       |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | 5,460 |   |
| Settlement                      of lawsuit                                   |   |                                                            | 0          |   |                                                                                                                                                  |   | 0          |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0        |   |                       |   | 0       |                                 |   |   | 35,250                                                                                |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | 35,250 |   |
| Dividends                      on preferred shares                           |   |                                                            | 0          |   |                                                                                                                                                  |   | 0          |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0        |   |                       |   | 0       |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | (22,060 | ) |   |   | (22,060 | ) |
| Net                      loss for year                                       |   |                                                            | 0          |   |                                                                                                                                                  |   | 0          |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0        |   |                       |   | 0       |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | (1,346,833 | ) |   |   | (1,346,833 | ) |
|                                                                         |   |                                                            |       |   |                                                                                                                                                  |   |       |                                                               |   |   |                                                                                                                                                     |   |   |                                  |     |   |                       |   |    |                                 |   |   |                                                                                  |   |   |                                                                |   |   |   |   |   |   |   |   |   |   |
| **Balance,                      June 30, 2003**                         |   |                                                            | 32,923,855 |   |                                                                                                                                                  |   | 13,335,752 |                                                               |   |   | 439,610                                                                                                                                                  |   |   |                                  | 439,610  |   |                       |   | (66,500 | )                                    |   |   | 211,915                                                                               |   |   |                                                                | 46,267 |   |   |   | (14,595,116 | ) |   |   | (628,072 | ) |
| **Shares                      Issued for**                                   |   |                                                            |       |   |                                                                                                                                                  |   |       |                                                               |   |   |                                                                                                                                                     |   |   |                                  |     |   |                       |   |    |                                 |   |   |                                                                                  |   |   |                                                                |   |   |   |   |   |   |   |   |   |   |
| Cash                      on private placement                               |   |                                                            | 6,609,336  |   |                                                                                                                                                  |   | 6,042,935  |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0        |   |                       |   | 0       |                                 |   |   | (211,915                                                                              | )      |   |                                                                | 0      |   |   |   | 0 |   |   |   | 5,831,020 |   |
| Cash                      on exercise of options                             |   |                                                            | 25,000     |   |                                                                                                                                                  |   | 25,000     |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0        |   |                       |   | 0       |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | 25,000 |   |
| Settlement                      of lawsuit                                   |   |                                                            | 37,500     |   |                                                                                                                                                  |   | 35,250     |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0        |   |                       |   | 0       |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | 35,250 |   |
| Services                                                                     |   |                                                            | 25,000     |   |                                                                                                                                                  |   | 21,873     |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0        |   |                       |   | 0       |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | 21,873 |   |
| Redemption                      of preferred shares                          |   |                                                            | 415,000    |   |                                                                                                                                                  |   | 415,000    |                                                               |   |   | (118,572                                                                                                                                                 | )      |   |                                  | (118,572 | )      |                       |   | 0       |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | (296,428 | ) |   |   | 0 |   |
| Exercise                      of warrants                                    |   |                                                            | 288,298    |   |                                                                                                                                                  |   | 0          |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0        |   |                       |   | 0       |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | 0 |   |
| Shares                      returned to treasury for  cancellation |   |                                                            | (142,140   | )      |                                                                                                                                                  |   | 0          |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0        |   |                       |   | 0       |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | 0 |   |
| Stock                      option compensation                               |   |                                                            | 0          |   |                                                                                                                                                  |   | 321,275    |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0        |   |                       |   | 0       |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | 321,275 |   |
| Dividends                      on preferred shares                           |   |                                                            | 0          |   |                                                                                                                                                  |   | 0          |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0        |   |                       |   | 0       |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | (19,016 | ) |   |   | (19,016 | ) |
| Net                      loss for year                                       |   |                                                            | 0          |   |                                                                                                                                                  |   | 0          |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0        |   |                       |   | 0       |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | (2,543,848 | ) |   |   | (2,543,848 | ) |
|                                                                         |   |                                                            |       |   |                                                                                                                                                  |   |       |                                                               |   |   |                                                                                                                                                     |   |   |                                  |     |   |                       |   |    |                                 |   |   |                                                                                  |   |   |                                                                |   |   |   |   |   |   |   |   |   |   |
| **Balance,                      June 30, 2004**                         |   |                                                            | 40,181,849 |   |                                                                                                                                                  | $      | 20,197,085 |                                                               |   |   | 321,038                                                                                                                                                  |   |   | $                                     | 321,038  |   |                       | $      | (66,500 | )                                    |   | $      | 0                                                                                     |   |   | $                                                                   | 46,267 |   |   | $ | (17,454,408 | ) |   | $ | 3,043,482 |   |

----

**INTEGRAL            TECHNOLOGIES, INC.**

**(A            Development Stage Company)**

**Consolidated            Statements of Stockholders' Equity (Deficit)**

**(US            Dollars) **

----

|                                                 |   | **Shares****of                      Common****Stock****Issued** |       |   | **Common****Stock                      and****Paid-in                      Capital****in                      Excess****of                      Par** |   |       | **Shares                      of****Preferred****Stock****Issued** |   |   | **Preferred****Stock                      and****Paid                      in-Capital****in                      Excess****of                      Par** |   |   | **Promissory****Notes****Receivable** |    |   | **Share****Subscriptions** |   |    | **Other****Comprehensive****Income** |   |   | **Deficit****Accumulated****During                      the****Development****Stage** |   |   | **Total****Stockholders'****Equity                      (Deficit)** |   |
|------------------------------------------------------|--------|-----------------------------------------------------------------|------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------|--------------------------------------------------------------------|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------------------------------------|---------|--------|----------------------------|--------|---------|--------------------------------------|--------|--------|---------------------------------------------------------------------------------------|--------|--------|---------------------------------------------------------------------|--------|
|                                                 |   |                                                            |       |   |                                                                                                                                                  |   |       |                                                               |   |   |                                                                                                                                                     |   |   |                                  |    |   |                       |   |    |                                 |   |   |                                                                                  |   |   |                                                                |   |
| **Balance,                      June 30, 2004** |   |                                                            | 40,181,849 |   |                                                                                                                                                  | $      | 20,197,085 |                                                               |   |   | 321,038                                                                                                                                                  |   |   | $                                     | 321,038 |   |                       | $      | (66,500 | )                                    |   | $      | 0                                                                                     |   |   | $                                                                   | 46,267 |   |   | $ | (17,454,408 | ) |   | $ | 3,043,482 |   |
| **Shares                      Issued for**           |   |                                                            |       |   |                                                                                                                                                  |   |       |                                                               |   |   |                                                                                                                                                     |   |   |                                  |    |   |                       |   |    |                                 |   |   |                                                                                  |   |   |                                                                |   |   |   |   |   |   |   |   |   |   |
| Settlement                      of debt              |   |                                                            | 44,000     |   |                                                                                                                                                  |   | 55,000     |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0       |   |                       |   | 0       |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | 55,000 |   |
| Cashless                      exercise of warrants   |   |                                                            | 1,713,300  |   |                                                                                                                                                  |   | 0          |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0       |   |                       |   | 0       |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | 0 |   |
| For                      services                    |   |                                                            | 500,000    |   |                                                                                                                                                  |   | 270,000    |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0       |   |                       |   | 0       |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | 270,000 |   |
| Redemption                      of preferred shares  |   |                                                            | 0          |   |                                                                                                                                                  |   | 0          |                                                               |   |   | (12,500                                                                                                                                                  | )      |   |                                  | (12,500 | )      |                       |   | 0       |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | (37,500 | ) |   |   | (50,000 | ) |
| Dividends                      on preferred shares   |   |                                                            | 0          |   |                                                                                                                                                  |   | 0          |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0       |   |                       |   | 0       |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | (15,739 | ) |   |   | (15,739 | ) |
| Net                      loss for year               |   |                                                            | 0          |   |                                                                                                                                                  |   | 0          |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0       |   |                       |   | 0       |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | (1,812,265 | ) |   |   | (1,812,265 | ) |
|                                                 |   |                                                            |       |   |                                                                                                                                                  |   |       |                                                               |   |   |                                                                                                                                                     |   |   |                                  |    |   |                       |   |    |                                 |   |   |                                                                                  |   |   |                                                                |   |   |   |   |   |   |   |   |   |   |
| **Balance,                      June 30, 2005** |   |                                                            | 42,439,149 |   |                                                                                                                                                  |   | 20,522,085 |                                                               |   |   | 308,538                                                                                                                                                  |   |   |                                  | 308,538 |   |                       |   | (66,500 | )                                    |   |   | 0                                                                                     |   |   |                                                                | 46,267 |   |   |   | (19,319,912 | ) |   |   | 1,490,478 |   |
| **Shares                      Issued for**           |   |                                                            |       |   |                                                                                                                                                  |   |       |                                                               |   |   |                                                                                                                                                     |   |   |                                  |    |   |                       |   |    |                                 |   |   |                                                                                  |   |   |                                                                |   |   |   |   |   |   |   |   |   |   |
| Exercise                      of options             |   |                                                            | 200,000    |   |                                                                                                                                                  |   | 134,000    |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0       |   |                       |   | 0       |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | 134,000 |   |
| Cashless                      exercise of warrants   |   |                                                            | 35,115     |   |                                                                                                                                                  |   | 0          |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0       |   |                       |   | 0       |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | 0 |   |
| For                      services                    |   |                                                            | 269,000    |   |                                                                                                                                                  |   | 191,510    |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0       |   |                       |   | 0       |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | 191,510 |   |
| Exercise                      of warrants            |   |                                                            | 1,291,168  |   |                                                                                                                                                  |   | 1,080,669  |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0       |   |                       |   | 0       |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | 1,080,669 |   |
| Repayment                      of promissory note    |   |                                                            | 0          |   |                                                                                                                                                  |   | 0          |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0       |   |                       |   | 34,000  |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | 34,000 |   |
| Dividends                      on preferred shares   |   |                                                            | 0          |   |                                                                                                                                                  |   | 0          |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0       |   |                       |   | 0       |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | (15,427 | ) |   |   | (15,427 | ) |
| Stock                      option compensation       |   |                                                            | 0          |   |                                                                                                                                                  |   | 107,219    |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0       |   |                       |   | 0       |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | 107,219 |   |
| Net                      loss for year               |   |                                                            | 0          |   |                                                                                                                                                  |   | 0          |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0       |   |                       |   | 0       |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | (2,104,189 | ) |   |   | (2,104,189 | ) |
|                                                 |   |                                                            |       |   |                                                                                                                                                  |   |       |                                                               |   |   |                                                                                                                                                     |   |   |                                  |    |   |                       |   |    |                                 |   |   |                                                                                  |   |   |                                                                |   |   |   |   |   |   |   |   |   |   |
| **Balance,                      June 30, 2006** |   |                                                            | 44,234,432 |   |                                                                                                                                                  |   | 22,035,483 |                                                               |   |   | 308,538                                                                                                                                                  |   |   |                                  | 308,538 |   |                       |   | (32,500 | )                                    |   |   | 0                                                                                     |   |   |                                                                | 46,267 |   |   |   | (21,439,528 | ) |   |   | 918,260 |   |
| **Shares                      Issued for**           |   |                                                            |       |   |                                                                                                                                                  |   |       |                                                               |   |   |                                                                                                                                                     |   |   |                                  |    |   |                       |   |    |                                 |   |   |                                                                                  |   |   |                                                                |   |   |   |   |   |   |   |   |   |   |
| Exercise                      of options             |   |                                                            | 50,000     |   |                                                                                                                                                  |   | 35,000     |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0       |   |                       |   | 0       |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | 35,000 |   |
| For                      services                    |   |                                                            | 50,000     |   |                                                                                                                                                  |   | 105,000    |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0       |   |                       |   | 0       |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | 105,000 |   |
| Private                      placement               |   |                                                            | 1,180,537  |   |                                                                                                                                                  |   | 2,361,641  |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0       |   |                       |   | 0       |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | 2,361,641 |   |
| Repayment                      of promissory note    |   |                                                            | 0          |   |                                                                                                                                                  |   | 0          |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0       |   |                       |   | 2,763   |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | 2,763 |   |
| Dividends                      on preferred shares   |   |                                                            | 0          |   |                                                                                                                                                  |   | 0          |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0       |   |                       |   | 0       |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | (15,427 | ) |   |   | (15,427 | ) |
| Stock                      option compensation       |   |                                                            | 0          |   |                                                                                                                                                  |   | 4,225,648  |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0       |   |                       |   | 0       |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | 0 |   |   |   | 4,225,648 |   |
| Net                      loss for year               |   |                                                            | 0          |   |                                                                                                                                                  |   | 0          |                                                               |   |   | 0                                                                                                                                                        |   |   |                                  | 0       |   |                       |   | 0       |                                 |   |   | 0                                                                                     |   |   |                                                                | 0      |   |   |   | (5,985,850 | ) |   |   | (5,985,850 | ) |
|                                                 |   |                                                            |       |   |                                                                                                                                                  |   |       |                                                               |   |   |                                                                                                                                                     |   |   |                                  |    |   |                       |   |    |                                 |   |   |                                                                                  |   |   |                                                                |   |   |   |   |   |   |   |   |   |   |
| **Balance,                      June 30, 2007** |   |                                                            | 45,514,969 |   |                                                                                                                                                  | $      | 28,762,772 |                                                               |   |   | 308,538                                                                                                                                                  |   |   | $                                     | 308,538 |   |                       | $      | (29,737 | )                                    |   | $      | 0                                                                                     |   |   | $                                                                   | 46,267 |   |   | $ | (27,440,805 | ) |   | $ | 1,647,035 |   |

----

**INTEGRAL            TECHNOLOGIES, INC.**

**(A            Development Stage Company)**

**Consolidated            Statements of Cash Flows**

**(US            Dollars) **

----

|                                                                                                                               |   | **2007** |       |   | **2006** |   |       | **2005** |   |   | **Period                      from****February                      12, 1996****(Inception)****June                      30, 2007** |   |
|------------------------------------------------------------------------------------------------------------------------------------|--------|----------|------------|--------|----------|--------|------------|----------|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------|--------|
| **Operating                      Activities**                                                                                      |   |     |       |   |     |   |       |     |   |   |                                                                                                                                |   |
| Net                      loss                                                                                                      |   | $        | (5,985,850 | )      |     | $      | (2,104,189 | )        |   | $      | (1,812,265                                                                                                                          | )      |   | $ | (26,675,201 | ) |
| Adjustments                      to reconcile net loss to  net cash used by operating                      activities    |   |     |       |   |     |   |       |     |   |   |                                                                                                                                |   |   |   |   |   |
| Write-down                      of investment                                                                                      |   |     | 0          |   |     |   | 0          |     |   |   | 1                                                                                                                                   |   |   |   | 1,250,000 |   |
| Other                      income                                                                                                  |   |     | 0          |   |     |   | 0          |     |   |   | (55,462                                                                                                                             | )      |   |   | (658,305 | ) |
| Proprietary,                      non-competition agreement                                                                        |   |     | 0          |   |     |   | 0          |     |   |   | 0                                                                                                                                   |   |   |   | 711,000 |   |
| Consulting                      services                                                                                           |   |     | 199,790    |   |     |   | 359,220    |     |   |   | 7,500                                                                                                                               |   |   |   | 1,523,783 |   |
| Depreciation                      and amortization                                                                                 |   |     | 0          |   |     |   | 8,219      |     |   |   | 23,031                                                                                                                              |   |   |   | 349,941 |   |
| Stock                      option compensation                                                                                     |   |     | 4,225,648  |   |     |   | 107,219    |     |   |   | 0                                                                                                                                   |   |   |   | 5,466,350 |   |
| Interest                      on beneficial conversion feature                                                                     |   |     | 0          |   |     |   | 0          |     |   |   | 0                                                                                                                                   |   |   |   | 566,456 |   |
| Settlement                      of lawsuit                                                                                         |   |     | 0          |   |     |   | 0          |     |   |   | 0                                                                                                                                   |   |   |   | 60,250 |   |
| Write-down                      of license and operating assets                                                                    |   |     | 0          |   |     |   | 0          |     |   |   | 0                                                                                                                                   |   |   |   | 1,853,542 |   |
| Bad                      debt                                                                                                      |   |     | 0          |   |     |   | 0          |     |   |   | 0                                                                                                                                   |   |   |   | 77,712 |   |
|                                                                                                                               |   |     |       |   |     |   |       |     |   |   |                                                                                                                                |   |   |   |   |   |
| Due                      to West Virginia University Research Corporation                                                          |   |     | 0          |   |     |   | 0          |     |   |   | (397,296                                                                                                                            | )      |   |   | 0 |   |
| Changes                      in non-cash working capital                                                                           |   |     |       |   |     |   |       |     |   |   |                                                                                                                                |   |   |   |   |   |
| Due                      from affiliated company                                                                                   |   |     | 0          |   |     |   | 0          |     |   |   | 0                                                                                                                                   |   |   |   | (116,000 | ) |
| Notes                      and accounts receivable                                                                                 |   |     | 0          |   |     |   | 0          |     |   |   | 0                                                                                                                                   |   |   |   | (109,213 | ) |
| Inventory                                                                                                                          |   |     | 0          |   |     |   | 0          |     |   |   | 0                                                                                                                                   |   |   |   | (46,842 | ) |
| Prepaid                      expenses                                                                                              |   |     | (18,187    | )      |     |   | (4,613     | )        |   |   | 16,449                                                                                                                              |   |   |   | (32,442 | ) |
| Deferred                      revenue and other                                                                                    |   |     | 0          |   |     |   | 0          |     |   |   | 0                                                                                                                                   |   |   |   | (2,609 | ) |
| Accounts                      payable and accruals                                                                                 |   |     | (77,267    | )      |     |   | 90,851     |     |   |   | 153,711                                                                                                                             |   |   |   | 914,190 |   |
| **Net                      Cash Used in Operating Activities**                                                                     |   |     | (1,655,866 | )      |     |   | (1,543,293 | )        |   |   | (2,064,331                                                                                                                          | )      |   |   | (14,867,388 | ) |
| **Investing                      Activities**                                                                                      |   |     |       |   |     |   |       |     |   |   |                                                                                                                                |   |   |   |   |   |
| Purchase                      of property, equipment and    Intangibles                      assets            |   |     | 0          |   |     |   | 0          |     |   |   | 0                                                                                                                                   |   |   |   | (200,935 | ) |
| Assets                      acquired and liabilities assumed    on purchase of                      subsidiary |   |     | 0          |   |     |   | 0          |     |   |   | 0                                                                                                                                   |   |   |   | (129,474 | ) |
| Investment                      in and advances to affiliate companies                                                             |   |     | 0          |   |     |   | 0          |     |   |   | 0                                                                                                                                   |   |   |   | (2,000,000 | ) |
| License                      agreements                                                                                            |   |     | 0          |   |     |   | 0          |     |   |   | 0                                                                                                                                   |   |   |   | (124,835 | ) |
| **Net                      Cash Used in Investing Activities**                                                                     |   |     | 0          |   |     |   | 0          |     |   |   | 0                                                                                                                                   |   |   |   | (2,455,244 | ) |
| **Financing                      Activities**                                                                                      |   |     |       |   |     |   |       |     |   |   |                                                                                                                                |   |   |   |   |   |
| Redemption                      of preferred shares                                                                                |   |     | 0          |   |     |   | 0          |     |   |   | (50,000                                                                                                                             | )      |   |   | (50,000 | ) |
| Repayment                      of loan                                                                                             |   |     | 0          |   |     |   | 34,000     |     |   |   | 0                                                                                                                                   |   |   |   | (11,000 | ) |
| Advances                      from stockholders                                                                                    |   |     | 0          |   |     |   | 0          |     |   |   | 0                                                                                                                                   |   |   |   | 1,078,284 |   |
| Repayments                      from (to) stockholders                                                                             |   |     | 2,763      |   |     |   | 0          |     |   |   | 0                                                                                                                                   |   |   |   | (91,283 | ) |
| Subscriptions                      received                                                                                        |   |     | 0          |   |     |   | 0          |     |   |   | 0                                                                                                                                   |   |   |   | 226,665 |   |
| Proceeds                      from issuance of common stock                                                                        |   |     | 2,396,641  |   |     |   | 1,214,669  |     |   |   | 0                                                                                                                                   |   |   |   | 17,991,475 |   |
| Proceeds                      from convertible debentures                                                                          |   |     | 0          |   |     |   | 0          |     |   |   | 0                                                                                                                                   |   |   |   | 600,000 |   |
| Share                      issue costs                                                                                             |   |     | 0          |   |     |   | 0          |     |   |   | 0                                                                                                                                   |   |   |   | (227,420 | ) |
| **Net                      Cash Provided by (Used in)                      Financing  Activities**                       |   |     | 2,399,404  |   |     |   | 1,248,669  |     |   |   | (50,000                                                                                                                             | )      |   |   | 19,516,721 |   |
| **Effect                      of Foreign Currency Translation  on                      Cash**                            |   |     | 0          |   |     |   | 0          |     |   |   | 0                                                                                                                                   |   |   |   | 46,267 |   |
| **Inflow                      (Outflow) of Cash**                                                                                  |   |     | 743,538    |   |     |   | (294,624   | )        |   |   | (2,114,331                                                                                                                          | )      |   |   | 2,240,356 |   |
| **Cash,                      Beginning of Year**                                                                                   |   |     | 1,496,818  |   |     |   | 1,791,442  |     |   |   | 3,905,773                                                                                                                           |   |   |   | 0 |   |
| **Cash,                      End of Year**                                                                                         |   | $        | 2,240,356  |   |     | $      | 1,496,818  |     |   | $      | 1,791,442                                                                                                                           |   |   | $ | 2,240,356 |   |

----

**INTEGRAL            TECHNOLOGIES, INC.**

**(A            Development Stage Company)**

**Notes            to Consolidated Financial Statements**

**Years            Ended June 30, 2007, 2006 and 2005**

**(US            Dollars)**

----

| **1.** | **INCORPORATION                      AND NATURE OF OPERATIONS** |
|--------|-----------------------------------------------------------------|

| **2.** | **SIGNIFICANT                      ACCOUNTING POLICIES** |
|--------|----------------------------------------------------------|

|   | (a) | Principles                      of consolidation |
|--------|-----|--------------------------------------------------|

|   | (b) | Depreciation                      and amortization |
|--------|-----|----------------------------------------------------|

| Machinery,                      furniture and equipment | -   5                      years |
|---------------------------------------------------------|-------------------------------------------------|
| Computer                      hardware and software     | -   5                      years |
| Moulds                                                  | -   5                      years |

|   | (c) | Loss                      per share |
|--------|-----|-------------------------------------|

|   | (d) | Stock                      issued in exchange for services |
|--------|-----|------------------------------------------------------------|

----

**INTEGRAL            TECHNOLOGIES, INC.**

**(A            Development Stage Company)**

**Notes            to Consolidated Financial Statements**

**Years            Ended June 30, 2007, 2006 and 2005**

**(US            Dollars)**

----

**2.**
**SIGNIFICANT            ACCOUNTING POLICIES**

|   | (e) | Revenue                      recognition |
|--------|-----|------------------------------------------|

|   | (f) | Foreign                      currency translation |
|--------|-----|---------------------------------------------------|

|   | (g) | Research                      and development |
|--------|-----|-----------------------------------------------|

|   | (h) | Use                      of estimates |
|--------|-----|---------------------------------------|

|   | (i) | Financial                      instruments |
|--------|-----|--------------------------------------------|

|   | (i) | Fair                      value |
|--------|-----|---------------------------------|

|   | (ii) | Interest                      rate risk |
|--------|------|-----------------------------------------|

|   | (iii) | Credit                      risk |
|--------|-------|----------------------------------|

----

**INTEGRAL            TECHNOLOGIES, INC.**

**(A            Development Stage Company)**

**Notes            to Consolidated Financial Statements**

**Years            Ended June 30, 2007, 2006 and 2005**

**(US            Dollars)**

----

| **2.** | **SIGNIFICANT                      ACCOUNTING POLICIES**                      (Continued) |
|--------|-------------------------------------------------------------------------------------------|

|   | (i) | Financial                      instruments (Continued) |
|--------|-----|--------------------------------------------------------|

|   | (iv) | Currency                      risk |
|--------|------|------------------------------------|

|   | (j) | Income                      taxes |
|--------|-----|-----------------------------------|

|   | (k) | Stock-based                      compensation |
|--------|-----|-----------------------------------------------|

*"Accounting for Stock Issued to Employees"*
*“Accounting for Stock-Based Compensation”*
*“Share-Based            Payment*
*”*

|   | (l) | Comprehensive                      income |
|--------|-----|-------------------------------------------|

----

**INTEGRAL            TECHNOLOGIES, INC.**

**(A            Development Stage Company)**

**Notes            to Consolidated Financial Statements**

**Years            Ended June 30, 2007, 2006 and 2005**

**(US            Dollars)**

----

| **2.** | **SIGNIFICANT                      ACCOUNTING POLICIES**                      (Continued) |
|--------|-------------------------------------------------------------------------------------------|

|   | (m) | Recent                      accounting pronouncements |
|--------|-----|-------------------------------------------------------|

|   | (i) | In                      February 2007, the FASB issued SFAS No. 159, *“The Fair Value Option                      for Financial Assets and Financial Liabilities - Including                      an Amendment of                      FASB Statement No. 115”.* This statement permits entities to choose to                      measure many financial instruments and certain other items                      at fair value.                      Most of the provisions of SFAS No. 159 apply only to entities                      that elect                      the fair value option. However, the amendment to SFAS No. 115,                      *“Accounting for Certain Investments in Debt and Equity                      Securities*”, applies to all entities with available-for-sale and                      trading securities. SFAS No. 159 is effective as of the beginning                      of an                      entity’s first fiscal year that begins after November 15, 2007. Early                      adoption is permitted as of the beginning of a fiscal year                      that begins on                      or before November 15, 2007, provided the entity also elects                      to apply the                      provision of SFAS No. 157, *“Fair Value Measurements”.* The                      adoption of this statement is not expected to have a material                      effect on                      the Company's financial statements. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | In                      September 2006, the SEC issued SAB No. 108, *“Considering the                      Effects of Prior Year Misstatements when Quantifying Misstatements                      in                      Current Year Financial Statements”*.  SAB No. 108                      addresses how the effects of prior year uncorrected misstatements                      should                      be considered when quantifying misstatements in current year                      financial                      statements. SAB No. 108 requires companies to quantify misstatements                      using a balance sheet and income statement approach and to                      evaluate                      whether either approach results in quantifying an error that                      is material                      in light of relevant quantitative and qualitative factors.                      SAB No. 108 is                      effective for fiscal years ending after November 15, 2006. The                      adoption of SAB No. 108 did not have a material effect on the                      Company’s financial statements. |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iii) | In                      September 2006, the FASB issued SFAS No. 158, “*Employers’ Accounting                      for Defined Benefit Pension and Other Postretirement Plans                      - an amendment                      of FASB Statements No. 87, 88, 106, and 132(R)*”. This statement                      requires employers to recognize the over-funded or under-funded                      status of                      a defined benefit postretirement plan (other than a multiemployer                      plan) as                      an asset or liability in its balance sheet and to recognize                      changes in                      that funded status in the year in which the changes occur through                      comprehensive income of a business entity or changes in unrestricted                      net                      assets of a not-for-profit organization. This statement also                      requires an                      employer to measure the funded status of a plan as of the date                      of its                      year-end statement of cash flows, with limited exceptions.                      The provisions                      of SFAS No. 158 are effective for employers with publicly traded                      equity                      securities as of the end of the fiscal year ending after December                      15,                      2006. The adoption of this statement did not have a material                      effect on the                      Company's future reported financial position or results of                      operations. |
|--------|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**INTEGRAL            TECHNOLOGIES, INC.**

**(A            Development Stage Company)**

**Notes            to Consolidated Financial Statements**

**Years            Ended June 30, 2007, 2006 and 2005**

**(US            Dollars)**

----

| **2.** | **SIGNIFICANT                      ACCOUNTING POLICIES**                      (Continued) |
|--------|-------------------------------------------------------------------------------------------|

|   | (m) | Recent                      accounting pronouncements                      (Continued) |
|--------|-----|----------------------------------------------------------------------------------------|

|   | (iv) | In                      September 2006, the FASB issued SFAS No. 157, “*Fair Value                      Measurements*”. The objective of SFAS No. 157 is to increase                      consistency and comparability in fair value measurements and                      to expand                      disclosures about fair value measurements. SFAS No. 157 defines                      fair                      value, establishes a framework for measuring fair value in                      generally                      accepted accounting principles, and expands disclosures about                      fair value                      measurements. SFAS No. 157 applies under other accounting pronouncements                      that require or permit fair value measurements and does not                      require any                      new fair value measurements. The provisions of SFAS No. 157                      are effective                      for fair value measurements made in fiscal years beginning                      after November                      15, 2007. The adoption of this statement is not expected to                      have a                      material effect on the Company's future reported financial                      position or                      results of operations. |
|--------|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (v) | In                      June 2006, FASB issued Interpretation No. 48 ("FIN 48"),                      *“Accounting for Uncertainty in Income Taxes - an interpretation                      of                      FASB Statement No. 109”*, which clarifies the accounting for                      uncertainty in income tax positions ("tax positions"). FIN 48                      requires the Company to recognize in its financial statements                      the impact                      of a tax position if that tax position is more likely than                      not of being                      sustained on audit, based on the technical merits of the tax                      position. The                      provisions of FIN 48 are effective as of the beginning of the                      Company's 2008 fiscal year, with the cumulative effect of the                      change in                      accounting principle recorded as an adjustment to opening retained                      earnings. The Company estimates that no material cumulative                      effect                      adjustment will be charged to retained earnings to increase                      reserves for                      uncertain tax positions. This estimate is subject to revision                      as the                      Company completes its analysis. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (vi) | In                      March 2006, the FASB issued SFAS No. 156, "*Accounting for Servicing of                      Financial Assets, an amendment of FASB Statement No. 140, Accounting                      for                      Transfers and Servicing of Financial Assets and Extinguishments                      of                      Liabilities*". This statement requires all separately recognized                      servicing assets and servicing liabilities be initially measured                      at fair                      value, if practicable, and permits for subsequent measurement                      using either                      fair value measurement with changes in fair value reflected                      in earnings or                      the amortization and impairment requirements of Statement No.                      140. The                      subsequent measurement of separately recognized servicing assets                      and                      servicing liabilities at fair value eliminates the necessity                      for entities                      that manage the risks inherent in servicing assets and servicing                      liabilities with derivatives to qualify for hedge accounting                      treatment and                      eliminates the characterization of declines in fair value as                      impairments                      or direct write-downs. SFAS No. 156 is effective for an entity's                      first                      fiscal year beginning after September 15, 2006. The adoption                      of this                      statement is not expected to have a material effect on the                      Company's                      financial statements. |
|--------|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**INTEGRAL            TECHNOLOGIES, INC.**

**(A            Development Stage Company)**

**Notes            to Consolidated Financial Statements**

**Years            Ended June 30, 2007, 2006 and 2005**

**(US            Dollars)**

----

| **2.** | **SIGNIFICANT                      ACCOUNTING POLICIES**                      (Continued) |
|--------|-------------------------------------------------------------------------------------------|

|   | (m) | Recent                      accounting pronouncements                      (Continued) |
|--------|-----|----------------------------------------------------------------------------------------|

|   | (vii) | In                      February 2006, the FASB issued SFAS No. 155, "*Accounting for Certain                      Hybrid Financial Instruments-an amendment of FASB Statements                      No. 133 and                      140*", to simplify and make more consistent the accounting                      for certain                      financial instruments. SFAS No. 155 amends SFAS No. 133, "*Accounting                      for Derivative Instruments and Hedging Activities*", to permit fair                      value re-measurement for any hybrid financial instrument with                      an embedded                      derivative that otherwise would require bifurcation, provided                      that the                      whole instrument is accounted for on a fair value basis. SFAS                      No. 155                      amends SFAS No. 140, "*Accounting for the Impairment or Disposal of                      Long-Lived Assets*", to allow a qualifying special-purpose entity to                      hold a derivative financial instrument that pertains to a beneficial                      interest other than another derivative financial instrument.                      SFAS No. 155                      applies to all financial instruments acquired or issued after                      the                      beginning of an entity's first fiscal year that begins after                      September 15,                      2006, with earlier application allowed. The adoption of this                      statement is                      not expected to have a material effect on the Company's financial                      statements. |
|--------|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (viii) | FAS                      151, Inventory Costs.  This statement is effective for inventory                      costs incurred during fiscal years beginning after                      June 15, 2005.  Earlier application is permitted for                      inventory costs incurred during fiscal years beginning after                      November 24,                      2004.  The provisions of this statement should be applied                      prospectively.  There is no impact on the Company’s financial                      statements. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ix) | FAS                      153, Exchanges of Non-Monetary Assets.  The provisions of this                      statement are effective for non-monetary asset exchanges occurring                      in                      fiscal periods beginning after June 15, 2005.  Earlier                      application is permitted for non-monetary asset exchanges occurring                      in                      fiscal periods beginning after December 16, 2004.  The                      provisions of this statement should be applied                      prospectively.  There is no impact on the Company’s financial                      statements. |
|--------|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (x) | In                      December 2004, the FASB issued Statement No. 123 (revised 2004),                      *“Share-Based Payment”* (“SFAS 123(R)”), which requires the                      measurement and recognition of compensation expense for all                      stock-based                      compensation payments and supersedes the Company’s current accounting                      under APB 25.  SFAS 123(R) is effective for all annual                      periods beginning after June 15, 2005.  In March 2005, the SEC                      issued SAB No. 107 relating to the adoption of SFAS 123(R).                      The Company                      adopted SFAS 123(R) in the first quarter of fiscal                      2006. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **3.** | **STOCKHOLDERS'                      EQUITY** |
|--------|-----------------------------------------------|

|   | (a) | Common                      stock |
|--------|-----|-----------------------------------|

|   | (i) | During                      the year ended June 30, 2005, the                      Company: |
|--------|-----|---------------------------------------------------------------------------------------------|

|   | (a) | Issued                      44,000 shares to settle debt for                      $55,000; |
|--------|-----|--------------------------------------------------------------------------------------------|

|   | (b) | Issued                      500,000 shares as partial consideration for consulting services                      to be                      provided over 12 months. These shares have been recorded at                      a value of                      $270,000 representing the market value of the shares at the                      date of                      issuance, and were amortized over the term of the contract;                      and |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (c) | Issued                      1,713,300 shares on exercise of cashless                      warrants. |
|--------|-----|-----------------------------------------------------------------------------------------------------|

----

**INTEGRAL              TECHNOLOGIES, INC.**

**(A              Development Stage Company)**

**Notes              to Consolidated Financial Statements**

**Years              Ended June 30, 2007, 2006 and 2005**

**(US              Dollars)**

----

| **3.** | **STOCKHOLDERS'                      EQUITY** (Continued) |
|--------|-----------------------------------------------------------|

|   | (a) | Common                      stock (Continued) |
|--------|-----|-----------------------------------------------|

|   | (ii) | During                      the year ended June 30, 2006, the                      Company |
|--------|------|--------------------------------------------------------------------------------------------|

|   | (a) | Issued                      19,000 shares for services in the amount of                      $29,010; |
|--------|-----|-------------------------------------------------------------------------------------------------------|

|   | (b) | Issued                      250,000 shares as partial consideration for consulting services                      to be                      provided over 12 months. These shares have been recorded at                      a value of                      $162,500 representing the market value of the shares at the                      date of                      issuance, and were amortized over the term of the                      contract; |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (c) | Issued                      1,291,168 shares in the amount of $1,080,669 on exercise of                      warrants;                      and |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (d) | Issued                      35,115 shares on exercise of cashless                      warrants. |
|--------|-----|--------------------------------------------------------------------------------------------------|

|   | (iii) | During                      the year ended June 30, 2007, the                      Company: |
|--------|-------|---------------------------------------------------------------------------------------------|

|   | (a) | Closed                      a private placement on September 15, 2006 of 1,180,537 units                      consisting of                      common stock at $2 per share and warrants to purchase 590,269                      shares of                      common stock within two years at an exercise price of $2.50                      per share,                      provided that in the event that the average closing bid price                      of a share                      of the Company's common stock exceeds $4.50 for ten consecutive                      trading                      days, the Company has the right to redeem the warrants for                      $0.01 per share                      of common stock purchasable hereunder, upon thirty days’ written notice                      (the holder shall have the right to exercise the warrant in                      accordance                      with its terms prior to the expiration of the thirty-day                      period).  The purchase price attributable to the warrants was                      $0.001 per share of common stock underlying the warrants. Aggregate                      proceeds from the sale of the common stock and the warrants                      was $2,361,641                      ($2,361,051 for the common stock and $590 for the warrants).  At                      any time commencing sixty days after the close of the offering,                      the                      investors can require that the Company prepare and file a registration                      statement to register the shares of common stock (including                      the shares                      underlying the warrants) for resale by the investors. The Company                      also                      reserves the right to file such a registration statement at                      any time after                      the closing date on its own                      initiative; |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b) | Issued                      50,000 shares in the amount of $35,000 on the exercise of options;                      and |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------|

|   | (c) | Issued                      50,000 shares as consideration for consulting services to be                      provided over                      12 months. These shares have been recorded at a value of $105,000                      representing the market value of the shares at the date of                      issuance. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b) | Preferred                      stock |
|--------|-----|--------------------------------------|

----

**INTEGRAL            TECHNOLOGIES, INC.**

**(A            Development Stage Company)**

**Notes            to Consolidated Financial Statements**

**Years            Ended June 30, 2007, 2006 and 2005**

**(US            Dollars)**

----

| **3.** | **STOCKHOLDERS'                      EQUITY** (Continued) |
|--------|-----------------------------------------------------------|

|   | (b) | Preferred                      stock (Continued) |
|--------|-----|--------------------------------------------------|

|   | (c) | Stock                      options and stock-based                      compensation |
|--------|-----|--------------------------------------------------------------------------------------|

**Stock            option plans**

**Option            Grants**

----

**INTEGRAL            TECHNOLOGIES, INC.**

**(A            Development Stage Company)**

**Notes            to Consolidated Financial Statements**

**Years            Ended June 30, 2007, 2006 and 2005**

**(US            Dollars)**

----

| **3.** | **STOCKHOLDERS'                      EQUITY** (Continued) |
|--------|-----------------------------------------------------------|

|   | (c) | Stock                      options and stock-based compensation                      (Continued) |
|--------|-----|--------------------------------------------------------------------------------------------------|

**Option            Grants**

**Stock-based            compensation**

*"Accounting for Stock Issued to            Employees"*
*“Accounting for Stock-Based Compensation*
*”*
*“Share-Based            Payment*
*”*

----

**INTEGRAL            TECHNOLOGIES, INC.**

**(A            Development Stage Company)**

**Notes            to Consolidated Financial Statements**

**Years            Ended June 30, 2007, 2006 and 2005**

**(US            Dollars)**

----

| **3.** | **STOCKHOLDERS'                      EQUITY** (Continued) |
|--------|-----------------------------------------------------------|

|   | (c) | Stock                      options and stock-based compensation                      (Continued) |
|--------|-----|--------------------------------------------------------------------------------------------------|

**Key            assumptions**

|                                       |   | **2007** |   |   | **2006** |   |   | **2005** |   |
|--------------------------------------------|--------|----------|--------|--------|----------|--------|--------|----------|--------|
|                                       |   |     |   |   |     |   |   |     |   |
| Expected                      life (years) |   |     | 1      |   |     |   | 2      |     |   |   | 1 |   |
| Interest                      rate         |   |     | 5.00   | %      |     |   | 3.00   | %        |   |   | 3.45 | % |
| Volatility                                 |   |     | 106.90 | %      |     |   | 59.09  | %        |   |   | 75.00 | % |
| Dividend                      yield        |   |     | 0.00   | %      |     |   | 0.00   | %        |   |   | 0.00 | % |
| Estimated                      forfeitures |   |     | 0.00   | %      |     |   | 0.00   | %        |   |   | 0.00 | % |

----

**INTEGRAL            TECHNOLOGIES, INC.**

**(A            Development Stage Company)**

**Notes            to Consolidated Financial Statements**

**Years            Ended June 30, 2007, 2006 and 2005**

**(US            Dollars)**

----

| **3.** | **STOCKHOLDERS'                      EQUITY** (Continued) |
|--------|-----------------------------------------------------------|

|   | (c) | Stock                      options and stock-based compensation                      (Continued) |
|--------|-----|--------------------------------------------------------------------------------------------------|

**Stock            option activity**

|                                         |   | Numberof                      Shares |      |   | PricePer                      Share |   |                                 | WeightedAverageExercisePrice |   |
|----------------------------------------------|--------|--------------------------------------|-----------|--------|-------------------------------------|--------|--------------------------------------|------------------------------|--------|
|                                         |   |                                 |      |   |                                |   |                                 |                         |   |
| Balance,                      June 30, 2004  |   |                                 | 1,547,500 |   |                                |   | $0.64                      to $ 1.50 |                         |   | $ | 0.94 |   |
| Granted                      during the year |   |                                 | 1,000,000 |   |                                |   | $0.50                                |                         |   | $ | 0.50 |   |
| Cancelled                                    |   |                                 | (102,500  | )      |                                |   | $0.65                      to $ 1.50 |                         |   | $ | 0.77 |   |
| Exercised                                    |   |                                 | 0         |   |                                |   | $0.00                                |                         |   | $ | 0.00 |   |
|                                         |   |                                 |      |   |                                |   |                                 |                         |   |   |   |   |
| Balance,                      June 30, 2005  |   |                                 | 2,445,000 |   |                                |   | $0.50                      to $ 1.16 |                         |   | $ | 0.76 |   |
| Granted                      during the year |   |                                 | 50,000    |   |                                |   | $0.40                                |                         |   | $ | 0.40 |   |
| Cancelled                                    |   |                                 | 0         |   |                                |   | $0.00                                |                         |   | $ | 0.00 |   |
| Exercised                                    |   |                                 | (200,000  | )      |                                |   | $0.40                      to $ 1.00 |                         |   | $ | 0.67 |   |
|                                         |   |                                 |      |   |                                |   |                                 |                         |   |   |   |   |
| Balance,                      June 30, 2006  |   |                                 | 2,295,000 |   |                                |   | $0.40                      to $ 1.16 |                         |   | $ | 0.76 |   |
| Granted                      during the year |   |                                 | 1,450,000 |   |                                |   | $1.00                      to $ 2.75 |                         |   | $ | 2.16 |   |
| Cancelled                                    |   |                                 | 0         |   |                                |   | $0.00                                |                         |   | $ | 0.00 |   |
| Exercised                                    |   |                                 | (25,000   | )      |                                |   | $1.00                                |                         |   | $ | 1.00 |   |
|                                         |   |                                 |      |   |                                |   |                                 |                         |   |   |   |   |
| Balance,                      June 30, 2007  |   |                                 | 3,720,000 |   |                                |   | $0.50                      to $ 2.75 |                         |   | $ | 1.31 |   |

|                                   |   | Exercise |                                 |   | Number                      of Shares |   |
|----------------------------------------|--------|----------|--------------------------------------|--------|---------------------------------------|--------|
| Expiry                      Date       |   | Price    |                                 |   | **2007**                              |   |   | **2006** |   |   | **2005** |   |
|                                   |   |     |                                 |   |                                  |   |   |   |   |   |   |   |
| August                      31, 2007   |   |     | $0.65                      to $ 1.16 |   |                                  |   | 855,000 | * |   |   | 880,000 |   |   |   | 1,030,000 |   |
| November                      3, 2007  |   |     | $1.00                                |   |                                  |   | 100,000 |   |   |   | 0 |   |   |   | 0 |   |
| March                      23, 2008    |   |     | $1.00                                |   |                                  |   | 100,000 |   |   |   | 0 |   |   |   | 0 |   |
| March                      30, 2009    |   |     | $2.75                                |   |                                  |   | 250,000 |   |   |   | 0 |   |   |   | 0 |   |
| June                      30, 2010     |   |     | $0.50                                |   |                                  |   | 1,000,000 |   |   |   | 1,000,000 |   |   |   | 1,000,000 |   |
| June                      30, 2010     |   |     | $2.25                                |   |                                  |   | 1,000,000 |   |   |   | 0 |   |   |   | 0 |   |
| December                      31, 2010 |   |     | $1.00                                |   |                                  |   | 415,000 |   |   |   | 415,000 |   |   |   | 415,000 |   |
|                                   |   |     |                                 |   |                                  |   |   |   |   |   |   |   |   |   |   |   |
| Total                      outstanding |   |     | $0.50                      to $ 2.75 |   |                                  |   | 3,720,000 |   |   |   | 2,295,000 |   |   |   | 2,445,000 |   |
| Total                      exercisable |   |     | $0.50                      to $ 2.75 |   |                                  |   | 3,626,250 |   |   |   | 2,295,000 |   |   |   | 2,445,000 |   |

|   | * | Subsequent                      to the year-end, the expiry date of these options was extended                      from August                      31, 2007 to August 31, 2008. |
|--------|---|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**INTEGRAL            TECHNOLOGIES, INC.**

**(A            Development Stage Company)**

**Notes            to Consolidated Financial Statements**

**Years            Ended June 30, 2007, 2006 and 2005**

**(US            Dollars)**

----

**3.**
**STOCKHOLDERS'            EQUITY**

|   | (c) | Stock                      options and stock-based compensation                      (Continued) |
|--------|-----|--------------------------------------------------------------------------------------------------|

**Stock            option activity**

**Pro            forma disclosure**

|                                                                                                                                                                                            |   | **2005** |       |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------|------------|
|                                                                                                                                                                                            |   |     |       |
| Net                      loss, as reported                                                                                                                                                      |   | $        | (1,812,265 | ) |
| Deduct:                                                                                                                                                                                         |   |     |       |   |
| Stock-based                      employee compensation expense under intrinsic value method                      included in                      reported net loss, net of related tax effects |   |     | 0          |   |
| Add:                                                                                                                                                                                            |   |     |       |   |
| Total                      stock-based compensation expense determined under fair value                      based method                      for all awards, net of related tax effects       |   |     | (326,000   | ) |
|                                                                                                                                                                                            |   |     |       |   |
| Net                      loss, pro forma                                                                                                                                                        |   | $        | (2,138,265 | ) |
|                                                                                                                                                                                            |   |     |       |   |
| Net                      loss per share, as reported                                                                                                                                            |   | $        | (0.04      | ) |
| Deduct:                                                                                                                                                                                         |   |     |       |   |
| Stock-based                      employee compensation expense under intrinsic value method                      included in                      reported net loss, net of related tax effects |   |     | 0.00       |   |
| Add:                                                                                                                                                                                            |   |     |       |   |
| Total                      stock-based compensation expense determined under fair value                      based method                      for all awards, net of related tax effects       |   |     | (0.01      | ) |
|                                                                                                                                                                                            |   |     |       |   |
| Net                      loss per share, pro forma                                                                                                                                              |   | $        | (0.05      | ) |

----

**INTEGRAL            TECHNOLOGIES, INC.**

**(A            Development Stage Company)**

**Notes            to Consolidated Financial Statements**

**Years            Ended June 30, 2007, 2006 and 2005**

**(US            Dollars)**

----

| **3.** | **STOCKHOLDERS'                      EQUITY** (Continued) |
|--------|-----------------------------------------------------------|

|   | (d) | Stock                      purchase warrants |
|--------|-----|----------------------------------------------|

|                                    |   | Exercise |   |   | Number                      of Shares |   |
|-----------------------------------------|--------|----------|--------|--------|---------------------------------------|--------|
| Expiry                      Date        |   | Price    |   |   | **2007**                              |   |   | **2006** |   |
|                                    |   |     |   |   |                                  |   |   |   |   |
| September                      15, 2008 |   | $        | 2.50   |   |                                  |   | 590,269 |   |   |   | 0 |   |

|   | (e) | Promissory                      notes receivable at June 30, 2007                      includes: |
|--------|-----|--------------------------------------------------------------------------------------------------|

|   | (i) | $17,500                      (2006 - $17,500) due on exercise of 210,000 stock options,                      interest at 10%                      per annum, due November 1, 2002, subsequently extended to                      June 30, 2003; and |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | $12,237                      (2006 - $15,000) due on exercise of 23,000 stock options, interest                      at 10%                      per annum due June 30, 2003. |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **4.** | **SUPPLEMENTAL                      DISCLOSURE OF CASH FLOW                      INFORMATION** |
|--------|------------------------------------------------------------------------------------------------|

|                                                                      |   |                                          |    |   |        |   |    |     |   |   | **Period                      from**   |   |
|---------------------------------------------------------------------------|--------|-----------------------------------------------|---------|--------|-------------|--------|---------|----------|--------|--------|----------------------------------------|--------|
|                                                                      |   |                                          |    |   |        |   |    |     |   |   | **February                      12,**  |   |
|                                                                      |   |                                          |    |   |        |   |    |     |   |   | **1996**                               |   |
|                                                                      |   |                                          |    |   |        |   |    |     |   |   | **(Inception)**                        |   |
|                                                                      |   | **Years                      Ended June 30,** |    |   | **Through** |   |
|                                                                      |   | **2007**                                      |    |   | **2006**    |   |    | **2005** |   |   | **June                      30, 2007** |   |
|                                                                      |   |                                          |    |   |        |   |    |     |   |   |                                   |   |
| **Supplemental                      Disclosure of Non-Cash Transactions** |   |                                          |    |   |        |   |    |
| **Shares                      Issued for**                                |   |                                          |    |   |        |   |    |     |   |   |                                   |   |
| Redemption                      of preferred shares                       |   | $                                             | 0       |   |        | $      | 0       |     |   | $      | 0                                      |   |   | $ | 415,000 |   |
| Property                      and equipment                               |   | $                                             | 0       |   |        | $      | 0       |     |   | $      | 0                                      |   |   | $ | 23,000 |   |
| Proprietary                      agreement                                |   | $                                             | 0       |   |        | $      | 0       |     |   | $      | 0                                      |   |   | $ | 711,000 |   |
| Settlement                      of accounts payable                       |   | $                                             | 0       |   |        | $      | 0       |     |   | $      | 55,000                                 |   |   | $ | 228,742 |   |
| Services                      (provided by officers                       |   | $                                             | 0       |   |        | $      | 0       |     |   | $      | 0                                      |   |   | $ | 120,000 |   |
| Settlement                      of lawsuit                                |   | $                                             | 0       |   |        | $      | 0       |     |   | $      | 0                                      |   |   | $ | 15,000 |   |
| Services                                                                  |   | $                                             | 105,000 |   |        | $      | 191,510 |     |   | $      | 270,000                                |   |   | $ | 801,784 |   |
| Acquisition                      of subsidiary                            |   | $                                             | 0       |   |        | $      | 0       |     |   | $      | 0                                      |   |   | $ | 894,200 |   |
| **Supplemental                      Cash Flow Information**               |   |                                          |    |   |        |   |    |     |   |   |                                   |   |   |
| Interest                      paid                                        |   | $                                             | 0       |   |        | $      | 0       |     |   | $      | 0                                      |   |   | $ | 81,111 |   |
| Income                      tax paid                                      |   | $                                             | 0       |   |        | $      | 0       |     |   | $      | 0                                      |   |   | $ | 0 |   |

----

**INTEGRAL            TECHNOLOGIES, INC.**

**(A            Development Stage Company)**

**Notes            to Consolidated Financial Statements**

**Years            Ended June 30, 2007, 2006 and 2005**

**(US            Dollars)**

----

| **5.** | **RELATED                      PARTY TRANSACTIONS** |
|--------|-----------------------------------------------------|

|   | (a) | Accounts                      payable at June 30, 2007 includes $7,730 (2006 - $7,870) due to two                      directors and officers of the                      Company. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b) | The                      Company recorded an expense of $505,000 (2006 - $360,000; 2005 -                      $430,000) for wages paid to two directors and officers of the                      Company. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **6.** | **INCOME                      TAXES** |
|--------|---------------------------------------|

|                                                 |   | **2007** |       |   | **2006** |   |   | **2005** |   |
|------------------------------------------------------|--------|----------|------------|--------|----------|--------|--------|----------|--------|
|                                                 |   |     |       |   |     |   |   |     |   |
| Deferred                      benefit                |   | $        | (2,994,000 | )      |     | $      | 0      |     |   | $ | (461,000 | ) |
| Increase                      in valuation allowance |   |     | 2,994,000  |   |     |   | 0      |     |   |   | 461,000 |   |
|                                                 |   |     |       |   |     |   |   |     |   |   |   |   |
| Total                      provision for income tax  |   | $        | 0          |   |     | $      | 0      |     |   | $ | 0 |   |

|                                                                                   |   | **2007** |       |   | **2006** |   |     | **2005** |   |
|----------------------------------------------------------------------------------------|--------|----------|------------|--------|----------|--------|----------|----------|--------|
|                                                                                   |   |     |       |   |     |   |     |     |   |
| Provision                      for income tax at the  statutory rate of 34%  |   | $        | (2,024,000 | )      |     | $      | (715,000 | )        |   | $ | (616,000 | ) |
| Increase                      in taxes due to change in  valuation allowance |   |     | 2,994,000  |   |     |   | 0        |     |   |   | 461,000 |   |
| Disallowed                      expense                                                |   |     | 1,000      |   |     |   | 1,000    |     |   |   | 2,000 |   |
| True-up                      of deferred tax assets                                    |   |     | (971,000   | )      |     |   | 714,000  |     |   |   | 153,000 |   |
|                                                                                   |   |     |       |   |     |   |     |     |   |   |   |   |
| Total                      provision for income tax                                    |   | $        | 0          |   |     | $      | 0        |     |   | $ | 0 |   |

----

**INTEGRAL            TECHNOLOGIES, INC.**

**(A            Development Stage Company)**

**Notes            to Consolidated Financial Statements**

**Years            Ended June 30, 2007, 2006 and 2005**

**(US            Dollars)**

----

| **6.** | **INCOME                      TAXES** (Continued) |
|--------|---------------------------------------------------|

|                                                                       |   | **2007** |       |   | **2006** |   |       | **2005** |   |
|----------------------------------------------------------------------------|--------|----------|------------|--------|----------|--------|------------|----------|--------|
|                                                                       |   |     |       |   |     |   |       |     |   |
| Current                      deferred tax assets                           |   |     |       |   |     |   |       |     |   |
| Legal                      dispute reserve                                 |   | $        | 182,000    |   |     | $      | 0          |     |   | $ | 0 |   |
| Accrued                      liabilities                                   |   |     | 7,000      |   |     |   | 5,000      |     |   |   | 5,000 |   |
|                                                                       |   |     |       |   |     |   |       |     |   |   |   |   |
| Total                      current deferred tax assets                     |   |     | 189,000    |   |     |   | 5,000      |     |   |   | 5,000 |   |
|                                                                       |   |     |       |   |     |   |       |     |   |   |   |   |
| Non-current                      deferred tax assets                       |   |     |       |   |     |   |       |     |   |   |   |   |
| Net                      operating loss carry-forwards                     |   |     | 6,454,000  |   |     |   | 5,738,000  |     |   |   | 5,300,000 |   |
| Non-qualified                      stock options                           |   |     | 1,670,000  |   |     |   | 0          |     |   |   | 0 |   |
| Capital                      loss carry-forwards                           |   |     | 425,000    |   |     |   | 0          |     |   |   | 0 |   |
| Investment                      reserve                                    |   |     | 247,000    |   |     |   | 254,000    |     |   |   | 692,000 |   |
| Basis                      difference of fixed assets                      |   |     | 4,000      |   |     |   | 0          |     |   |   | 0 |   |
| Valuation                      allowance                                   |   |     | (8,989,000 | )      |     |   | (5,994,000 | )        |   |   | (5,994,000 | ) |
|                                                                       |   |     |       |   |     |   |       |     |   |   |   |   |
| Total                      non-current deferred tax assets                 |   |     | (189,000   | )      |     |   | (2,000     | )        |   |   | (2,000 | ) |
|                                                                       |   |     |       |   |     |   |       |     |   |   |   |   |
| Non-current                      deferred tax liabilities                  |   |     |       |   |     |   |       |     |   |   |   |   |
| Basic                      difference of fixed assets                      |   |     | 0          |   |     |   | 3,000      |     |   |   | 3,000 |   |
| Total                      non-current deferred tax  liabilities |   |     | 0          |   |     |   | (3,000     | )        |   |   | (3,000 | ) |
|                                                                       |   |     |       |   |     |   |       |     |   |   |   |   |
| Net                      deferred tax asset (liability)                    |   | $        | 0          |   |     | $      | 0          |     |   | $ | 0 |   |

----

**INTEGRAL            TECHNOLOGIES, INC.**

**(A            Development Stage Company)**

**Notes            to Consolidated Financial Statements**

**Years            Ended June 30, 2007, 2006 and 2005**

**(US            Dollars)**

----

| **6.** | **INCOME                      TAXES** (Continued) |
|--------|---------------------------------------------------|

| Year                      Ended    | Expiry                      Date   |   | Amount |       |
|------------------------------------|------------------------------------|--------|--------|------------|
|                               |                               |   |   |       |
| June                      30, 1996 | June                      30, 2011 |   | $      | 346,000    |   |
| June                      30, 1997 | June                      30, 2012 |   |   | 1,405,000  |   |
| June                      30, 1998 | June                      30, 2018 |   |   | 999,000    |   |
| June                      30, 1999 | June                      30, 2019 |   |   | 1,361,000  |   |
| June                      30, 2000 | June                      30, 2020 |   |   | 1,091,000  |   |
| June                      30, 2001 | June                      30, 2021 |   |   | 2,002,000  |   |
| June                      30, 2002 | June                      30, 2022 |   |   | 2,526,000  |   |
| June                      30, 2003 | June                      30, 2023 |   |   | 1,364,000  |   |
| June                      30, 2004 | June                      30, 2024 |   |   | 2,162,000  |   |
| June                      30, 2005 | June                      30, 2025 |   |   | 2,208,000  |   |
| June                      30, 2006 | June                      30, 2026 |   |   | 2,373,000  |   |
| June                      30, 2007 | June                      30, 2027 |   |   | 1,144,000  |   |
|                               |                               |   |   |       |   |
|                               |                               |   | $      | 18,981,000 |   |

| Year                      Ended    | Expiry                      Date   |   | Amount |      |
|------------------------------------|------------------------------------|--------|--------|-----------|
|                               |                               |   |   |      |
| June                      30, 2005 | June                      30, 2010 |   | $      | 1,250,000 |   |

----

**INTEGRAL            TECHNOLOGIES, INC.**

**(A            Development Stage Company)**

**Notes            to Consolidated Financial Statements**

**Years            Ended June 30, 2007, 2006 and 2005**

**(US            Dollars)**

----

| **7.** | **LOSS                      PER SHARE** |
|--------|-----------------------------------------|

|                                                          |   | Income                      (Numerator) |       |   | Shares                      (Denominator) |   |       | Per                      Share Amount |   |
|---------------------------------------------------------------|--------|-----------------------------------------|------------|--------|-------------------------------------------|--------|------------|---------------------------------------|--------|
|                                                          |   |                                    |       |   |                                      |   |       |                                  |   |
| **2007**                                                      |   |                                    |       |   |                                      |   |       |                                  |   |
| Loss                      for the year                        |   | $                                       | (5,985,850 | )      |                                      |   |       |                                  |   |   |
| Preferred                      stock dividends                |   |                                    | (15,427    | )      |                                      |   |       |                                  |   |   |
|                                                          |   |                                    |       |   |                                      |   |       |                                  |   |   |
| Loss                      attributable to common shareholders |   | $                                       | (6,001,277 | )      |                                      |   | 45,230,171 |                                  |   | $ | (0.13 | ) |
|                                                          |   |                                    |       |   |                                      |   |       |                                  |   |   |   |   |
| **2006**                                                      |   |                                    |       |   |                                      |   |       |                                  |   |   |   |   |
| Loss                      for the year                        |   | $                                       | (2,106,285 | )      |                                      |   |       |                                  |   |   |   |   |
| Preferred                      stock dividends                |   |                                    | (15,427    | )      |                                      |   |       |                                  |   |   |   |   |
|                                                          |   |                                    |       |   |                                      |   |       |                                  |   |   |   |   |
| Loss                      attributable to common shareholders |   | $                                       | (2,121,712 | )      |                                      |   | 42,814,988 |                                  |   | $ | (0.05 | ) |

----

**PART        III**

**DIRECTORS        AND EXECUTIVE OFFICERS**

| Name                                 | Age    | Position                  with Company                                                      | Director                  of Company                  Since |
|--------------------------------------|--------|---------------------------------------------------------------------------------------------|-------------------------------------------------------------|
|                                 |   |                                                                                        |                                                        |
| William                  S. Robinson | 50     | Director,                  Chairman, CEO and Treasurer                                      | February                  1996                              |
|                                 |   |                                                                                        |                                                        |
| William                  A. Ince     | 56     | Director,                  President, Secretary and ChiefFinancial                  Officer | February                  1996                              |

**William Robinson**

*(Chairman,        CEO and Treasurer)*

**William        A. Ince**

*(Director,        President, Secretary and Chief Financial Officer)*

**Non-Executive        Officer / Significant Employee**

**Tom        Aisenbrey**

*Chief        Technology Officer*

----

**Audit        Committee and Audit Committee Financial Expert Disclosure**

**Code        of Ethics**

**Section        16(a) Beneficial Ownership Reporting Compliance**

----

**EXECUTIVE        COMPENSATION**

**Summary        Compensation Table**

| **Name                  and Principal Position**                                                         |   | **Fiscal                  Year Ended June 30** |   | **Salary                  ($)** |    |   | **Bonus                  ($)** |   |   | **Stock                  Awards** |   |   | **Options                  Awards ($) (n1)** |   |   | **Non-Equity                  Incentive Plan Compensation ($)** |      |   | **Nonqualified                  Deferred Compensation Earnings ($)** |   |   | **All                  Other****Compensation****($)                  (n2)** |   |   | **Total                  ($)** |   |
|----------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------|--------|---------------------------------|---------|--------|--------------------------------|--------|--------|-----------------------------------|--------|--------|----------------------------------------------|--------|--------|-----------------------------------------------------------------|-----------|--------|----------------------------------------------------------------------|--------|--------|-----------------------------------------------------------------------------|--------|--------|--------------------------------|--------|
|                                                                                                     |   |                                                |   |                            |    |   |                           |   |   |                              |   |   |                                         |   |   |                                                            |      |   |                                                                 |   |   |                                                                        |   |   |                           |   |
| William                  S.                                                                              |   | 2007                                                |   | $                               | 202,500 |   |                           | $      | 50,000 |                              |   |   | -0-                                          |   |   | $                                                               | -0-       |   |                                                                 |   | -0-    |                                                                        |   |   | -0-                            |   |   | $ | 26,782 |   |   | $ | 274,145 |   |
| Robinson                                                                                                 |   | 2006                                                |   | $                               | 180,000 |   |                           |   | -0-    |                              |   |   | -0-                                          |   |   | $                                                               | -0-       |   |                                                                 |   | -0-    |                                                                        |   |   | -0-                            |   |   | $ | 22,282 |   |   | $ | 202,282 |   |
| Chief                  Executive Officer, Treasurer, Chairman, Director                                  |   |                                                |   |                            |    |   |                           |   |   |                              |   |   |                                         |   |   |                                                            |      |   |                                                                 |   |   |                                                                        |   |   |                           |   |   |   |   |   |   |   |   |   |
|                                                                                                     |   |                                                |   |                            |    |   |                           |   |   |                              |   |   |                                         |   |   |                                                            |      |   |                                                                 |   |   |                                                                        |   |   |                           |   |   |   |   |   |   |   |   |   |
| William                  A.                                                                              |   | 2007                                                |   | $                               | 202,500 |   |                           | $      | 50,000 |                              |   |   | -0-                                          |   |   | $                                                               | 177,706   |   |                                                                 |   | -0-    |                                                                        |   |   | -0-                            |   |   | $ | 21,645 |   |   | $ | 451,851 |   |
| Ince                                                                                                     |   | 2006                                                |   | $                               | 180,000 |   |                           |   | -0-    |                              |   |   | -0-                                          |   |   | $                                                               | 91,424    |   |                                                                 |   | -0-    |                                                                        |   |   | -0-                            |   |   | $ | 17,145 |   |   | $ | 288,569 |   |
| Chief                  Financial and Accounting Officer, President, Secretary,                  Director |   |                                                |   |                            |    |   |                           |   |   |                              |   |   |                                         |   |   |                                                            |      |   |                                                                 |   |   |                                                                        |   |   |                           |   |   |   |   |   |   |   |   |   |
|                                                                                                     |   |                                                |   |                            |    |   |                           |   |   |                              |   |   |                                         |   |   |                                                            |      |   |                                                                 |   |   |                                                                        |   |   |                           |   |   |   |   |   |   |   |   |   |
| Thomas                                                                                                   |   | 2007                                                |   | $                               | 144,000 |   |                           |   | -0-    |                              |   |   | -0-                                          |   |   | $                                                               | 2,414,710 |   |                                                                 |   | -0-    |                                                                        |   |   | -0-                            |   |   | $ | 29,815 |   |   | $ | 2,588,525 |   |
| Aisenbrey                                                                                                |   | 2006                                                |   | $                               | 144,000 |   |                           |   | -0-    |                              |   |   | -0-                                          |   |   | $                                                               | -0-       |   |                                                                 |   | -0-    |                                                                        |   |   | -0-                            |   |   | $ | 31,904 |   |   | $ | 175,904 |   |
| Chief                  Technology Officer (non-executive officer)                                        |   |                                                |   |                            |    |   |                           |   |   |                              |   |   |                                         |   |   |                                                            |      |   |                                                                 |   |   |                                                                        |   |   |                           |   |   |   |   |   |   |   |   |   |

| ___________ |
|-------------|

| (n1) | Reflects                  dollar amount expensed by the company during applicable fiscal                  year for                  financial statement reporting purposes pursuant to FAS 123R.  FAS                  123R requires the company to determine the overall value of the                  options as                  of the date of grant based upon the Black-Scholes method of valuation,                  and                  to then expense that value over the service period over which the                  options                  become exercisable (vest).  As a general rule, for                  time-in-service-based options, the company will immediately expense                  any                  option or portion thereof which is vested upon grant, while expensing                  the                  balance on a pro rata basis over the remaining vesting term of                  the                  option.  For a description FAS 123R and the assumptions used in                  determining the value of the options under the Black-Scholes model                  of                  valuation, see the notes to the consolidated financial statements                  included                  with this report. |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| (n2) | William S. Robinson                  and William A. Ince each own shares of Series A Preferred                  Stock.  A 5% dividend on the Series A Preferred Stock is payable                  in cash or shares of common stock at the election of                  Integral.  For the year ended June 30, 2006, $10,282 was paid or                  accrued for Mr. Robinson and $5,145 was paid or accrued for Mr.                  Ince.  For the year ended June 30, 2007, $10,282 was paid or                  accrued for Mr. Robinson and $5,145 was paid or accrued for Mr.                  Ince. |
|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Executive        Officer Outstanding Equity Awards At Fiscal Year-End**

| **Option                  Awards**     |   |                                                                                                     | **Stock                  Awards** |   |
|----------------------------------------|--------|----------------------------------------------------------------------------------------------------------|-----------------------------------|--------|
|                                   |   |                                                                                                     |                              |   |   |   |   | **Equity                  Incentive Plan Awards:** |   |   |  |   |   |   |   |   |   |   |   |   |   |   | **Equity                  Incentive Plan Awards:** |   |   | **Equity                  Incentive Plan Awards:** |   |
|                                   |   |                                                                                                     |                              |   |   |   |   |   |   |   |  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Name**                               |   | **Number                  of Securities Underlying Unexercised Options(#)                  Exercisable** |                              |   | **Number                  of Securities Underlying Unexercised Options(#)                  Unexercisable** |   |   | **Number                  of Securities Underlying Unexercised Unearned Options                  (#)** |   |   | **Option                  Exercise Price ($)** |   |   | **Option                  Expiration Date** |   |   | **Number                  of Shares or Units of Stock That Have Not Vested                  (#)** |   |   | **Market                  Value of Shares or Units of Stock That Have Not                  Vested** |   |   | **Number                  of Unearned Shares, Units or Other Rights That Have Not                  Vested** |   |   | **Market                  or Payout Value of Unearned Shares, Units or Other Rights That                  Have Not                  Vested** |   |
|                                   |   |                                                                                                     |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| William                  S. Robinson   |   |                                                                                                     | 0                                 |   |   |   | 0 |   |   |   | 0 |   |   |   | 0 |   |   |   | n/a |   |   |   | 0 |   |   |   | 0 |   |   |   | 0 |   |   |   | 0 |   |
|                                   |   |                                                                                                     |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| William                  A. Ince (n1)  |   |                                                                                                     | 415,000                           |   |   |   | 0 |   |   |   | 0 |   |   | $ | 1.00 |   |   | 12/31/2010 |   |   |   | 0 |   |   |   | 0 |   |   |   | 0 |   |   |   | 0 |   |
|                                   |   |                                                                                                     |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Thomas                  Aisenbrey (n2) |   |                                                                                                     | 1,000,000                         |   |   |   | 0 |   |   |   | 0 |   |   | $ | 0.50 |   |   | 6/30/2010 |   |   |   | 0 |   |   |   | 0 |   |   |   | 0 |   |   |   | 0 |   |
|                                   |   |                                                                                                     | 1,000,000                         |   |   |   | 0 |   |   |   | 0 |   |   | $ | 2.25 |   |   | 6/30/2010 |   |   |   | 0 |   |   |   | 0 |   |   |   | 0 |   |   |   | 0 |   |
|                                   |   |                                                                                                     | 125,000                           |   |   |   | 0 |   |   |   | 0 |   |   | $ | 0.65 |   |   | 8/31/2007 |   |   |   | 0 |   |   |   | 0 |   |   |   | 0 |   |   |   | 0 |   |
|                                   |   |                                                                                                     | 75,000                            |   |   |   | 0 |   |   |   | 0 |   |   | $ | 0.65 |   |   | 8/31/2007 |   |   |   | 0 |   |   |   | 0 |   |   |   | 0 |   |   |   | 0 |   |
|                                   |   |                                                                                                     | 45,000                            |   |   |   | 0 |   |   |   | 0 |   |   | $ | 1.00 |   |   | 8/31/2007 |   |   |   | 0 |   |   |   | 0 |   |   |   | 0 |   |   |   | 0 |   |
|                                   |   |                                                                                                     | 200,000                           |   |   |   | 0 |   |   |   | 0 |   |   | $ | 1.00 |   |   | 8/31/2007 |   |   |   | 0 |   |   |   | 0 |   |   |   | 0 |   |   |   | 0 |   |

| (n1) | Mr.                  Ince holds the following options:  On July 1, 2002, Mr. Ince was                  granted an option to acquire 415,000 shares of common stock at                  an exercise                  price of $1.00 per share.  In June 2007, the expiration date of                  these options was extended until December 31,                  2010. |
|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (n2) | Mr.                  Aisenbrey holds the following                  options: |
|------|------------------------------------------------------------------------------|

|   | · | On                  August 16, 2001, Mr. Aisenbrey was granted an option to acquire                  125,000                  shares of common stock at an exercise price of $.65 per                  share.  In August 2007, the expiration date of these options was                  extended until August 31, 2008. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | On                  November 1, 2001, Mr. Aisenbrey was granted an option to acquire                  75,000                  shares of common stock at an exercise price of $.65 per share.                  In August                  2007, the expiration date of these options was extended until August                  31,                  2008. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | On                  July 1, 2002, Mr. Aisenbrey was granted an option to acquire 45,000                  shares                  of common stock at an exercise price of $1.00 per share. In August                  2007,                  the expiration date of these options was extended until August                  31,                  2008. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | On                  January 2, 2003, Mr. Aisenbrey was granted an option to acquire                  200,000                  shares of common stock at an exercise price of $1.00 per share.                  In August                  2007, the expiration date of these options was extended until August                  31,                  2008. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | On                  June 17, 2005, Mr. Aisenbrey was granted an option to acquire 1,000,000                  share of common stock at an exercise price of $.50 per share, exercisable                  in whole or in part at any time until June 30,                  2010. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | On                  November 6, 2006, Mr. Aisenbrey was granted an option to acquire                  1,000,000                  shares of common stock at an exercise price of $2.25 per share,                  exercisable in whole or in part at any time until June 30,                  2010. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Compensation        of Directors**

**Employment        Contracts and Termination of Employment and Change-in-Control        Arrangements**

**Employee        Benefit and Consulting Services Compensation Plans**

----

----

**SECURITY        OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER        MATTERS**

**Common        Stock**

| Name                  and Address ofBeneficial                  Owner (n1)                                                                     | Amount                  and Nature of Beneficial Ownership(n1)(n2) | Percent                  of Class (n3) |
|------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------|----------------------------------------|
| Executive                  Officers and Directors:                                                                                             |                                                               |                                   |
| William S. Robinson                  (n4)#3                  1070 West Pender St.Vancouver,                  B.C.  V6E 2N7 |  2,323,533                                                    |  5.1%                             |
| William A. Ince  (n5)805                  W. Orchard Dr., Suite #7Bellingham,                  WA 98225               |  2,128,833                                                    |  4.6%                             |
| Thomas Aisenbrey                  (n6)805                  W. Orchard Dr., Suite #7Bellingham,                  WA 98225             |  2,670,000                                                    |  5.6%                             |
| All                  executive officers and directors as a group (n6)                                                                          | 7,122,366                                                          | 14.7%                                  |
|                                                                                                                                           |                                                               |                                   |
| 5%                  Beneficial Owners:                                                                                                         |                                                               |                                   |
| Wellington                  Management Company, LLP (n7) 75                  State Street, Boston, MA 02109                               | 4,113,100                                                          | 9.0%                                   |

| (n1) | Unless                  otherwise indicated, all shares are directly beneficially owned                  and                  investing power is held by the persons                  named. |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (n2) | Includes                  vested options beneficially owned but not yet exercised and outstanding,                  if any.  The table does not include the effects of conversion by                  Mr. Robinson and Mr. Ince of their shares of Series A                  Convertible Preferred Stock (“Series A”), which are convertible into                  shares of common stock at a conversion rate that varies with the                  market                  price of the common stock at the time of conversion.  The                  conversion rate is determined by dividing the number of shares                  of                  Series A being converted by the average of the high and low bid                  prices of Integral’s common stock reported by the OTC Bulletin Board over                  the ten trading days preceding the date of conversion.  Mr.                  Robinson owns 204,975 shares of Series A and Mr. Ince owns 103,563                  shares                  of Series A.  As of September 14, 2007, the conversion rate                  was $1.70 per share, so Mr. Robinson’s 204,975 shares of Series A                  were convertible into 120,574 shares of common stock, and Mr. Ince’s                  103,563 shares of Series A were convertible into 60,919 shares of                  common stock.  The actual number of shares of common stock                  receivable by Messrs. Robinson and Ince upon conversion of the                  Series A would depend on the actual conversion rate in effect at the                  time of conversion. |
|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (n3) | Based                  upon 45,514,969 shares issued and outstanding, plus the amount of                  shares each person or group has the right to acquire within 60                  days                  pursuant to options, warrants, conversion privileges or other                  rights. |
|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| (n4) | Mr. Robinson                  is an executive officer and director of Integral and each of its                  subsidiaries.  Beneficial ownership figure includes an                  aggregate of 150,000 shares held in the names of his spouse and                  his two                  minor children. |
|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (n5) | Mr.                  Ince is an executive officer and director of Integral and each                  of its                  subsidiaries. Beneficial ownership figure includes 415,000 shares                  underlying options. |
|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (n6) | Mr.                  Aisenbrey is a non-executive officer of Integral, but is included                  in the                  table for informational purposes.  Beneficial ownership figure                  includes 2,445,000 shares underlying                  options. |
|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (n7) | Wellington                  Management Company, LLP, has included the following information                  in its                  Schedule 13G Amendment No. 6 filing with the Securities and Exchange                  Commission (as of December 31, 2006):  (a) Wellington, in                  its capacity as investment adviser, may be deemed to beneficially                  own                  4,113,100 shares of the Company which are held of record by clients                  of                  Wellington; (b) those clients have the right to receive, or the                  power to                  direct the receipt of, dividends from, or the proceeds from the                  sale of,                  such securities; and (c) no such client is known to have such right                  or                  power with respect to more than five percent of this class of                  securities. |
|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Series        A Convertible Preferred Stock**

| Name                  and Address ofBeneficial                  Owner (n1)                                                                     |  - | Amount                  and Nature of Beneficial                  Ownership(n1) | Percent                  of Class (n2) |
|------------------------------------------------------------------------------------------------------------------------------------------------|---------|---------------------------------------------------------------------------------|----------------------------------------|
| William S. Robinson                  (n3)#3                  1070 West Pender St.Vancouver,                  B.C.  V6E 2N7 |  - | 204,975                                                                         | 66.4%                                  |
| William A. Ince                  (n4)805                  W. Orchard Dr., Suite #3Bellingham,                  WA 98225         |    | 103,563                                                                         | 33.6%                                  |
| All                  officers and directors of Integral as a group (2 persons)                                                                 |    | 308,538                                                                         | 100%                                   |

| (n1) | Unless                  otherwise indicated, all shares are directly beneficially owned                  and                  investing power is held by the persons                  named. |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (n2) | Based                  upon 308,538 Series A Convertible Preferred shares issued and                  outstanding. |
|------|--------------------------------------------------------------------------------------------------------------------|

| (n3) | Mr.                  Robinson is an executive officer and director of Integral and each                  of its                  subsidiaries. |
|------|------------------------------------------------------------------------------------------------------------------------------------------------|

| (n4) | Mr. Ince                  is an executive officer and director of Integral and each of its                  subsidiaries. |
|------|--------------------------------------------------------------------------------------------------------------------------------|

----

**Equity        Compensation Plan Information**

|                                                                        | Number                  of securities to be issued upon exercise of outstanding options,                  warrants                  and rights | Weighted-average                  exercise price of options, warrants and rights | Number                  of securities available for future issuance under equity compensation                  plans (excluding securities reflected in column (a))  |
|-----------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Plan                  category                                              | (a)                                                                                                                                            | (b)                                                                              | (c)                                                                                                                                                                       |
| Equity                  compensation plans approved by security holders     | N/A                                                                                                                                            | N/A                                                                              | N/A                                                                                                                                                                       |
| Equity                  compensation plans not approved by security holders | 3,720,000                                                                                                                                      | $1.30                                                                            | 1,044,500                                                                                                                                                                 |
|  Total                                                                 | 3,720,000                                                                                                                                      | $1.30                                                                            | 1,044,500                                                                                                                                                                 |

|   | · | On                  June 17, 2005, Integral provided a Grant of Option to Thomas Aisenbrey.                  Pursuant to the Grant of Option, Mr. Aisenbrey was granted an option                  to                  acquire 1,000,000 share of common stock at an exercise price of                  $.50 per                  share, exercisable in whole or in part at any time until June 30,                  2010. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | On                  November 6, 2006, Integral provided a Grant of Option to Thomas                  Aisenbrey.                  Pursuant to the Grant of Option, Mr. Aisenbrey was granted an option                  to                  acquire 1,000,000 share of common stock at an exercise price of                  $2.25 per                  share, exercisable in whole or in part at any time until June 30,                  2010. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**CERTAIN        RELATIONSHIPS AND RELATED TRANSACTIONS**

**DIRECTOR        INDEPENDENCE**

----

**EXHIBITS**

| Exhibit                  No. | Description |
|------------------------------|-------------|

| 3.03 | Articles                  of Incorporation, as amended and currently in                  effect.  (Incorporated by reference to Exhibit 3.03 of                  Integral’s quarterly report on Form 10-QSB for the period ended March 31,                  2006.) |
|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.04 | Bylaws,                  as amended and restated on December 31, 1997.  (Incorporated by                  reference to Exhibit 3.04 of Integral’s quarterly report on Form 10-QSB                  for the period ended March 31,                  2006.) |
|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.12 | Integral                  Technologies, Inc. 2001 Stock Plan dated January 2, 2001, as amended                  December 17, 2001. (Incorporated by reference to Exhibit 10.12                  of                  Integral’s registration statement on Form S-8 (file no.                  333-76058).) |
|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.15 | Integral                  Technologies, Inc. 2003 Stock Plan dated April 4, 2003 (Incorporated                  by                  reference to Exhibit 10.15 of Integral’s registration statement on Form                  S-8 (file no. 333-104522).) |
|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.18 | Grant                  of Option dated June 17, 2005 between Integral and Thomas Aisenbrey.                  (Incorporated by reference to Exhibit 10.18 of Integral’s Current Report                  Form 8-K dated June 17, 2005 (filed June 23,                  2005).) |
|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.19 | Agreement                  between the Company and The QuanStar Group, LLC dated June 20,                  2005.                  (Incorporated by reference to Exhibit 10.18 of Integral’s Current Report                  Form 8-K dated June 17,2005 (filed June 23,                  2005).) |
|-------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.20 | Patent                  License Agreement between the Company and Heatron, Inc. dated March                  17,                  2006. (Incorporated by reference to Exhibit 10.20 of Integral’s Current                  Report Form 8-K dated March 17, 2006 (filed April 11,                  2006).) |
|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.21 | Patent                  License Agreement between the Company and Jasper Rubber Products,                  Inc.                  dated August 25, 2006. (Incorporated by reference to Exhibit 10.21                  of                  Integral’s Current Report Form 8-K dated August 25, 2006 (filed September                  19, 2006).) |
|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.22 | Grant                  of Option dated November 6, 2006 between Integral and Thomas Aisenbrey.                  (Incorporated by reference to Exhibit 10.22 of Integral’s Quarterly Report                  on Form 10-QSB for the period ended September 30,                  2006.) |
|-------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.23 | Manufacturing                  Agreement between Integral and Jasper Rubber Products, Inc.                  dated November 22, 2006. (Incorporated by reference to Exhibit 10.23                  of Integral’s Current Report on Form 8-K dated November 27, 2006 (filed                  December 4, 2006).) |
|-------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.24 | Patent                  License Agreement between Integral and ADAC Plastics, Inc. d/b/a ADAC                  Automotive, dated November 28, 2006. (Incorporated by reference                  to Exhibit                  10.24 of Integral’s Current Report on Form 8-K dated December 18, 2006                  (filed December 20, 2006).) |
|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.25 | Patent                  License Agreement between Integral and Esprit Solutions Limited,                  dated                  December 18, 2006. (Incorporated by reference to Exhibit 10.25 of                  Integral’s Current Report on Form 8-K dated January 9, 2007 (filed January                  19, 2007).) |
|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.26 | Patent                  License Agreement between Integral and Knowles Electronics, LLC,                  dated January 18, 2007. (Incorporated by reference to Exhibit 10.26                  of                  Integral’s Quarterly Report on Form 10-QSB for the period ended December                  31, 2006.) |
|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 10.27 | Agreement                  between Integral and Visionary Innovations, Inc., dated February 16,                  2007. (Incorporated by reference to Exhibit 10.27 of Integral’s Quarterly                  Report on Form 10-QSB for the period ended March 31,                  2007.) |
|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.28 | Amendment                  One to Manufacturing Agreement between Integral and Jasper Rubber                  Products, Inc. dated July 19, 2007. (Incorporated by reference                  to Exhibit                  10.28 of Integral’s Current Report on Form 8-K dated July 19, 2007 (filed                  July 30, 2007).) |
|-------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 14.1 | Code                  of Ethics adopted September 20, 2004. (Incorporated by reference                  to                  Exhibit 14.1 of Integral’s annual report on Form 10-KSB for the period                  ended June 30, 2004.) |
|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 21.4 | List                  of Subsidiaries. (Incorporated by reference to Exhibit 21.4 of                  Integral’s                  annual report on Form 10-KSB for the period ended June 30,                  2004.) |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 31.1 | Section                  302 Certification by the Corporation’s Chief Executive                  Officer.  (Filed                  herewith). |
|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 31.2 | Section                  302 Certification by the Corporation’s Chief Financial                  Officer.  (Filed                  herewith). |
|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 32.1 | Section                  906 Certification by the Corporation’s Chief Executive                  Officer.  (Filed                  herewith). |
|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 32.2 | Section                  906 Certification by the Corporation’s Chief Financial                  Officer.  (Filed                  herewith). |
|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**PRINCIPAL        ACCOUNTANT FEES AND SERVICES**

**Audit        Fees**

**Audit-Related        Fees**

**Tax        Fees**

**All        Other Fees**

----

**SIGNATURES**

|                                                  | INTEGRAL                  TECHNOLOGIES, INC                                                          |   |
|-------------------------------------------------------|------------------------------------------------------------------------------------------------------|--------|
|                                                  |                                                                                                 |   |
|                                                  |                                                                                                 |   |
| Dated:  September                  28, 2007 |   /s/                  William S. Robinson                                       |   |
|                                                  | William S. Robinson,                  Chief Executive Officer                              |   |
|                                                  |                                                                                                 |   |
|                                                  |   /s/                  William A. Ince                                           |   |
|                                                  | William A. Ince,                  Chief Financial Officer and Principal Accounting Officer |   |

| Name                                               |   | Title    | Date                                |
|----------------------------------------------------|--------|----------|-------------------------------------|
|                                               |   |     |                                |
| /s/                  William S. Robinson |   | Director | September                  28, 2007 |
| William S. Robinson                      |   |     |                                |
|                                               |   |     |                                |
| /s/                  William A. Ince     |   | Director | September                  28, 2007 |
| William A. Ince                          |   |     |                                |

----

| Exhibit                  No. | Description |
|------------------------------|-------------|

| 3.03 | Articles                  of Incorporation, as amended and currently in                  effect.  (Incorporated by reference to Exhibit 3.03 of                  Integral’s quarterly report on Form 10-QSB for the period ended March 31,                  2006.) |
|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.04 | Bylaws,                  as amended and restated on December 31, 1997.  (Incorporated by                  reference to Exhibit 3.04 of Integral’s quarterly report on Form 10-QSB                  for the period ended March 31,                  2006.) |
|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.12 | Integral                  Technologies, Inc. 2001 Stock Plan dated January 2, 2001, as amended                  December 17, 2001. (Incorporated by reference to Exhibit 10.12                  of                  Integral’s registration statement on Form S-8 (file no.                  333-76058).) |
|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.15 | Integral                  Technologies, Inc. 2003 Stock Plan dated April 4, 2003 (Incorporated                  by                  reference to Exhibit 10.15 of Integral’s registration statement on Form                  S-8 (file no. 333-104522).) |
|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.18 | Grant                  of Option dated June 17, 2005 between Integral and Thomas Aisenbrey.                  (Incorporated by reference to Exhibit 10.18 of Integral’s Current Report                  Form 8-K dated June 17, 2005 (filed June 23,                  2005).) |
|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.19 | Agreement                  between the Company and The QuanStar Group, LLC dated June 20,                  2005.                  (Incorporated by reference to Exhibit 10.18 of Integral’s Current Report                  Form 8-K dated June 17,2005 (filed June 23,                  2005).) |
|-------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.20 | Patent                  License Agreement between the Company and Heatron, Inc. dated March                  17,                  2006. (Incorporated by reference to Exhibit 10.20 of Integral’s Current                  Report Form 8-K dated March 17, 2006 (filed April 11,                  2006).) |
|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.21 | Patent                  License Agreement between the Company and Jasper Rubber Products,                  Inc.                  dated August 25, 2006. (Incorporated by reference to Exhibit 10.21                  of                  Integral’s Current Report Form 8-K dated August 25, 2006 (filed September                  19, 2006).) |
|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.22 | Grant                  of Option dated November 6, 2006 between Integral and Thomas Aisenbrey.                  (Incorporated by reference to Exhibit 10.22 of Integral’s Quarterly Report                  on Form 10-QSB for the period ended September 30,                  2006.) |
|-------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.23 | Manufacturing                  Agreement between Integral and Jasper Rubber Products, Inc.                  dated November 22, 2006. (Incorporated by reference to Exhibit 10.23                  of Integral’s Current Report on Form 8-K dated November 27, 2006 (filed                  December 4, 2006).) |
|-------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.24 | Patent                  License Agreement between Integral and ADAC Plastics, Inc. d/b/a ADAC                  Automotive, dated November 28, 2006. (Incorporated by reference                  to Exhibit                  10.24 of Integral’s Current Report on Form 8-K dated December 18, 2006                  (filed December 20, 2006).) |
|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.25 | Patent                  License Agreement between Integral and Esprit Solutions Limited,                  dated                  December 18, 2006. (Incorporated by reference to Exhibit 10.25 of                  Integral’s Current Report on Form 8-K dated January 9, 2007 (filed January                  19, 2007).) |
|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.26 | Patent                  License Agreement between Integral and Knowles Electronics, LLC,                  dated January 18, 2007. (Incorporated by reference to Exhibit 10.26                  of                  Integral’s Quarterly Report on Form 10-QSB for the period ended December                  31, 2006.) |
|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.27 | Agreement                  between Integral and Visionary Innovations, Inc., dated February 16,                  2007. (Incorporated by reference to Exhibit 10.27 of Integral’s Quarterly                  Report on Form 10-QSB for the period ended March 31,                  2007.) |
|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| 10.28 | Amendment                  One to Manufacturing Agreement between Integral and Jasper Rubber                  Products, Inc. dated July 19, 2007. (Incorporated by reference                  to Exhibit                  10.28 of Integral’s Current Report on Form 8-K dated July 19, 2007 (filed                  July 30, 2007).) |
|-------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 14.1 | Code                  of Ethics adopted September 20, 2004. (Incorporated by reference                  to                  Exhibit 14.1 of Integral’s annual report on Form 10-KSB for the period                  ended June 30, 2004.) |
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| 21.4 | List                  of Subsidiaries. (Incorporated by reference to Exhibit 21.4 of                  Integral’s                  annual report on Form 10-KSB for the period ended June 30,                  2004.) |
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| 31.1 | Section                  302 Certification by the Corporation’s Chief                  Executive Officer.  (Filed                  herewith). |
|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 31.2 | Section                  302 Certification by the Corporation’s Chief                  Financial Officer.  (Filed                  herewith). |
|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 32.1 | Section                  906 Certification by the Corporation’s Chief                  Executive Officer.  (Filed                  herewith). |
|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 32.2 | Section                  906 Certification by the Corporation’s Chief                  Financial Officer.  (Filed                  herewith). |
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