According to the Company’s FORM 10-K For The Fiscal Year Ended June 30, 2003, in October 1999, the lawsuit filed against the company and certain current and past officers and/or directors, alleging violation of federal securities. In November 1999, another lawsuit filed by Nahid Nazarian Behfarin, on her own behalf and others purported to be similarly situated, was served on the Company. In January 2003, the Company entered into a Stipulation of Settlement with the plaintiffs. The Company agreed to pay the plaintiffs 5,000,000 shares of common stock and $200,000 in cash. The Parties have accepted the settlement. The Company has issued the shares, and the Company’s insurance carrier has paid the $200,000 cash payment. Pursuant to a hearing in May 2003 the Court provided approval to the settlement.

As summarized by the Notice of Pendency and Proposed Settlement dated April 4, 2003, on or about December 7, 1999, plaintiffs filed their motion for Lead Plaintiffs and Lead Counsel pursuant to the guidelines of the Private Securities Litigation Reform Act of 1995 (the “PSLRA”), which was granted in January 2000. Thereafter, in December of 2000, certain Defendants filed a motion to dismiss the original complaint which was granted by the Court without prejudice to plaintiffs. As such, on or about March 19, 2001, plaintiffs filed their consolidated amended complaint (the “Complaint”) which was again challenged by certain Defendants in the Litigation. However, the Court denied Defendants’ second motion to dismiss on June 13, 2001. Subsequently, Defendants served discovery on plaintiffs regarding issues pertaining to class certification. Plaintiffs originally filed their motion for class certification on or about October 24, 2001. In response to the filing of plaintiffs’ motion, Defendants took the depositions of plaintiffs Nahid Nazarian Behfarin and Stephen Domagala on or about December 17, 2001. Plaintiffs refiled their motion for class certification on or about January 4, 2002. While Defendants opposed plaintiffs’ motion, it was ultimately granted and a class was certified by the Court on February 12, 2002.

The original complaint charges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10-b(5). Specifically, the Complaint alleges that during the Class Period, defendants, among other things, materially misrepresented the financial condition of ITEC by disseminating to the investment community false and misleading financial statements during the Class Period. It further alleges that these financial statements were deceptive and failed to conform with Generally Accepted Accounting Procedures ("GAAP") and that the Company had failed to disclose: (a) lower sales; (b) contract cancellations; (c) the Company's inability to collect payments on its receivables; and (d) the accrual of eighteen months' worth of undisclosed costs relating to ITEC's mergers.