SECURITIES AND EXCHANGE COMMISSION
                                Washington, D.C.

                                   FORM 10-QSB

 

                       Pursuant to Section 13 or 15(d) of
                           the Securities Act of 1934

   For the Quarter Ended                                       Commission File
   August 30, 1998                                              Number 0-19796


                   INTERACTIVE TECHNOLOGIES CORPORATION, INC.
               (Exact name of registrant as specified in charter)


   Wyoming                                                         98-0120805

   (State or other                                              (IRS Employer
   jurisdiction of                                         Identification No.)
   incorporation)


                           15400 Knoll Trail, Ste 106
                              Dallas, Texas 75248
                    (address of Principal Executive Offices)

                                  972-960-9400
               (Registrant's telephone number including area code)


   Check mark  whether the issuer (1) filed all reports  required to be filed by
   Section 13 or 15(d) of the  exchange  Act during the  preceding 12 months (or
   for such  shorter  period  that the  registrant  was  required  to file  such
   reports) and (2) has been subject to such filing requirements for the past 90
   days.
                          Yes_____X____  No __________

   The Registrant  has 48,229,616  shares of common stock,  par value $0.01 per
   share issued and outstanding  as of August 30, 1998.

   Traditional Small Business Disclosure Format

                          Yes _____X_____ No __________






<PAGE>




                   Interactive Technologies Corporation, Inc.

                                Table of Contents


   PART I - FINANCIAL INFORMATION                                      Page No.


   Item 1.     Interactive Technologies Corp, Inc.                      1 - 15
                   Financial Statements
               Balance Sheet as of  August 31, 1998 and 1997
               Statement of Operations for the three
                    months ended August 31, 1998 and 1997
               Statement of Operations for the three
                    months ended August 31, 1998 and 1997
               Consolidated Statement of Stockholders' Equity
               Statement of Cash Flows for the three months
                    ended August 31, 1998 and  1997
               Notes to Financial Statements

 
   Item 2.   Management's Discussion and Analysis                      


   PART II - OTHER INFORMATION


   Item 1.   Legal Proceedings                                         
 
   Item 2.   Changes in Securities                                     

   Item 3.   Defaults upon Senior Securities                           
 
   Item 4.   Submission of Matters to a Vote of Security Holders       
 
   Item 5.   Other Information                                         

   Item 6.   Exhibits and Reports on Form 8-K                          


   SIGNATURE PAGE                                                      









<PAGE>

Part 1-Financial Information
       Item 1   Financial Statements
       -----------------------------


                   INTERACTIVE TECHNOLOGIES CORPORATION, INC.
                                AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                            AUGUST 31, 1998 AND 1997

                                     Assets

                                                         1998           1997
Current assets:

    Cash                                              $  40,356      $   11,009
    Accounts and note receivable, trade,
      net of $10,080 and $25,000, respectively
      of allowance for uncollectible amounts            245,925          42,165
    Inventories                                         293,727               -
    Prepaid expenses and other assets                   118,884          15,406
                                                     ----------     ------------

           Total current assets                         698,892          68,580
                                                     ----------     ------------

Property and equipment, at cost, net of
  $219,758 and $34,270, respectively of
  accumulated depreciation                              192,849          80,871
                                                     ----------     ------------

Other assets:

    Organizational costs, net of $3,334
      and $2,534, respectively of
      accumulated amortization                            4,047           1,466
    Net assets of discontinued operations,
      Held for resale                                 3,463,762       4,684,766
    Intellectual properties, net of $4,063 
      of accumulated amortization                    22,297,621               -
    Notes receivable, net of $0 of allowance
      for uncollectible amounts                         899,833               -
    Other                                               531,772               -
    Goodwill                                          6,487,072               -
                                                     ----------      -----------

                                                     33,684,107       4,686,232
                                                     ----------      -----------
                      Total Assets                  $34,575,848      $4,835,683
                                                     ==========      ===========






    The accompanying notes are an integral part of the financial statements.

                                       1
<PAGE>


                   INTERACTIVE TECHNOLOGIES CORPORATION, INC.
                                AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                            AUGUST 31, 1998 AND 1997

                      Liabilities and Stockholders' Equity

                                                       1998             1997
Current liabilities:
    Accounts payable, trade                        $  392,475      $   127,812
    Accrued expenses                                  100,245           67,862
    Notes payable                                     109,795          274,685
    Advances from officers                             40,602                -
    Current portion of license rights
       payable                                        210,077          210,077
                                                     ----------    -------------

      Total current liabilities                       853,194          680,436
                                                   ----------      -------------

Long-term liabilities:
    License rights payable                            329,923          329,923
    Capital lease obligation                                -          218,750
    Deferred revenue                                  400,000                -
    Deferred income tax payable                     6,487,072                -
                                                   ----------      -------------

                                                    7,216,995          548,673
                                                   ----------      -------------

Commitments and contingencies:                              -                -

Stockholders' equity:
    Preferred stock Series M, $.001
      par value, 5,000,000 shares
      authorized, 1,143,000 and
      0, respectively, shares
      issued and outstanding                            1,143                -
    Common stock, $.01 par value
      50,000,000 shares authorized,
      48,229,616 and 13,479,613,
      respectively, shares issued
      and outstanding                                 482,259          134,796
    Paid in capital in excess of par               34,745,298       10,836,034
    Accumulated deficit                           ( 8,723,081)     ( 7,364,256)
                                                  ------------    --------------

                                                   26,505,659        3,606,574
                                                  ------------    --------------
                                                  $34,575,848      $ 4,835,683
                                                  ============    ==============



    The accompanying notes are an integral part of the financial statements.

                                       2
                                       
<PAGE>
                                                            
                   INTERACTIVE TECHNOLOGIES CORPORATION, INC.
                                AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF OPERATIONS
                   THREE MONTHS ENDED AUGUST 31, 1998 AND 1997



                                                       1998            1997
                                                       


Revenue                                            $   472,365     $      3,070

Cost of Goods Sold                                     261,876                -
                                                   -----------     ------------
     Gross income from operations                      210,489            3,070
                                                   -----------     ------------

Operating expenses:

   Depreciation                                         15,181            5,414
   Amortization                                          4,263          227,202
   Production costs                                          -              912
   General and administrative                          235,222          104,704
   Interest expense                                    122,479           12,264
                                                   -----------    --------------

                                                       377,145          350,496
                                                   -----------    --------------
Loss from operations                               (   166,654)   (     347,426)


Estimated income taxes                                       -                -
                                                   ------------   --------------

Net loss                                          $(   166,654)  $(     347,426)
                                                  =============  ===============





Net loss per share:

   Basic                                          $(      .01)   $(      .22)
   Diluted                                        $(      .01)   $(      .22)









    The accompanying notes are an integral part of the financial statements.

                                                             
                                       3
                                       
<PAGE>

<TABLE>
                   INTERACTIVE TECHNOLOGIES CORPORATION, INC.
                                AND SUBSIDIARIES
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
               FOR THE THREE MONTHS ENDED AUGUST 31, 1998 AND 1997
<CAPTION>

<S>                       <C>         <C>        <C>       <C>       <C>         <C>       <C>           <C>            <C>  
                                                     Preferred Stock     Preferred Stock
                                 Common Stock           (Series M)         (Series A)         Add'l Paid   Accumulated             
                             Shares      Amount   Shares      Amount  Shares       Amount     In Capital     Deficit       Total
                           ---------------------  ------------------  ---------------------  -----------  -----------   -----------
Balance at May 31, 1997    13,479,613    134,796         -        -          -           -   10,836,034   ( 7,016,829)     3,954,001
Issuance of common stock
 for cash                     421,000      4,210         -        -          -           -      206,290             -        210,500
Issuance of common stock in
 exchange for services        294,558      2,945         -        -          -           -      166,530             -        169,475
Issuance of common stock in
 settlement of capital 
 lease                        675,000      6,750         -        -          -           -      212,000             -        218,750
Issuance of preferred stock
 for cash                           -          - 1,029,750    1,030          -           -      840,337             -        841,367
Issuance of common and 
 preferred stock in
 acquisition of AIC        10,500,000    105,000         -        - 11,856,016  11,858,016    2,010,744             -     13,973,760
Net loss                            -          -         -        -          -                        -  (  1,539,595)   (1,539,595)
                           ----------   -------- --------- -------- ----------  ----------   ----------- -------------- -----------
                           25,370,171  $ 253,701 1,029,750 $  1,030 11,858,016  $11,858,016  $14,271,935 $( 8,556,424)  $17,828,258
Issuance of common stock
 for cash                     530,000      5,300                                                 100,700                     106,000
Issue preferred stock
 for cash                                          112,500      113                              112,387                     112,500
Issue common stock in
 exchange for services        750,000      7,500                                                 107,500                     115,000
Issue common stock in
 settlement of debts           50,000        500                                                  15,950                      16,450
Issue common stock for
 conversion of convertible
 debentures plus interest  13,071,429    130,714                                               9,019,286                   9,150,000
Issue common stock for
 conversion of Series A    11,858,016    118,580                    11,858,016  (11,858,016)           -                  
Cancell common stock
 from Perry West`        (  3,400,000)  ( 34,000)                                                 34,000                           -
Adjustment for costs                                                                           ( 655,895)                (  655,895)
Net loss for period                                                                                          (166,654)   (  166,654)
                          -----------   --------  --------  ------- ----------  -----------    ----------    ---------  ------------
Balance at 8/31/98         48,229,616  $ 482,295 1,142,500 $  1,143         -             -   $34,745,298  (8,723,078)  $26,505,659
                           ==========  =========  ======== ======== ==========  ===========   ===========  ===========  ===========

</TABLE>
    The accompanying notes are an integral part of the financial statements.

                                                                               
                                       4
                                     
<PAGE>
                   INTERACTIVE TECHNOLOGIES CORPORATION, INC.
                                AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF CASH FLOWS
               FOR THE THREE MONTHS ENDED AUGUST 31, 1998 AND 1997


                                                     1998             1997
                                                     ----             ----
Cash flows from operating activities:

    Cash received from customers                  $  398,577      $  111,561
    Cash paid to employees                       (   145,957)    (    43,056)
    Cash paid to suppliers                       (   301,066)    (   108,837)
    Taxes paid                                             -               -
                                                 ------------    ------------

    Net cash used in operating activities        (   170,925)    (    52,596)
                                                 ------------    ------------

Cash flows from investing activities:

    Advances to Subsidiaries                     (   132,395)              -
    Proceeds from issuance of preferred
      stock, net offering costs                      112,500               -
    Proceeds from notes payable                            -          50,000
    Repayments of notes payable                  (    20,668)              -
    Proceeds from issuance of common stock           106,000               -
                                                 ------------    ------------

    Net cash provided by financing activities         65,437          50,000
                                                 ------------    ------------


Net increase (decrease) in cash                  (   105,448)     (    2,596)

Cash at beginning of period                          145,844          13,605
                                                 ------------    ------------

Cash at end of period                           $     40,356     $    11,009
                                                ============     ============



    The accompanying notes are an integral part of the financial statements.

                                                                         
                                       5
                                      
<PAGE>

                   INTERACTIVE TECHNOLOGIES CORPORATION, INC.
                                AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF CASH FLOWS
               FOR THE THREE MONTHS ENDED AUGUST 31, 1998 AND 1997




                    Reconciliation of Net Income to Net Cash
                          Used in Operating Activities

                                                        1998            1997
                                                        ----            ----


Net loss                                           $(   166,654)   $(   347,426)
                                                   -------------   -------------

Adjustments to reconcile 
    net loss to net cash
    used in operating activities:

    Amortization                                          4,263         227,202
    Depreciation                                         15,181           5,414
    Common stock issued for services                     71,450               -
    Loss on disposition of assets                        34,748               -
    (Increase) decrease in accounts receivable       (   73,788)        108,491
    (Increase) decrease in prepaid expenses              15,000     (       616)
    Increase (decrease) accounts payable                 69,520     (    44,845)
    Increase (decrease) in accrued expenses          (  105,897)              -
                                                   -------------    ------------

    Total adjustments                                (    4,271)        294,830
                                                   -------------    ------------

    Net cash used in operating activities          $ (  170,925)    $(   52,596)
                                                   =============    ============







    The accompanying notes are an integral part of the financial statements.

                                       6
                                      
<PAGE>

                   INTERACTIVE TECHNOLOGIES CORPORATION, INC.
                                AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS


1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

     Interactive Technologies  Corporation,  Inc. (the Company) was incorporated
in the state of Wyoming on August 8, 1991. The Company owns proprietary software
and a trademark  known as Rebate TV, which is a marketing and sales medium for a
wide  variety of  products  and  services.  Advertisers  on Rebate TV will offer
substantial  rebates  to the  network's  viewers  through  a unique  interactive
program. Touch-tone phones will initially interact the network to secured earned
rebates,   and  later  the  network  will  be  accessed  via  wireless   digital
communications  networks currently under  development.  The Rebate TV operations
commenced in April 1996 serving  customers in the eastern  United States but was
temporarily  discontinued  subject to the sale of the show to a  national  media
market buyer.

     The  Company  also  owns   license   rights   obtained   from  the  Federal
Communications  Commission to operate an interactive  and data service system in
the  Charleston  - North  Charleston,  South  Carolina.  Another  system  in the
Melbourne - Titusville, Florida metropolitan area was sold during the year ended
May 31, 1997(Note 6). Management expects exploitation of these license rights to
commence in 1999.

Acquisition of Airtech International Corporation (AIC)

     On May 31, 1998, the Company  acquired all of the outstanding  common stock
shares of AIC, which through its  subsidiaries  manufacture and sell various air
filtration and  purification  products.  The total purchase price of $22,937,760
was funded  through the issuance of 10,500,000 of its common stock shares valued
at $.625 per share,  the  issuance  of  11,858,016  of its Series A  convertible
preferred  stock  shares  valued at $.625 per share (Note 7) and the issuance of
$9,000,000 of convertible debentures (Note 5).

     The  transaction was accounted for using the purchase method of accounting.
Accordingly,  the purchase  price of the net assets  acquired has been allocated
among the net assets based on their relative fair values with $22,297,684 of the
purchase  price  allocated to  intellectual  properties  based on an independent
asset appraisal.

     On July,  the Board of  Directors  of the Company  exercise  its option and
converted the  convertible  debentures  and Series A preferred  stock by issuing
24,929,445 shares of its unissued common stock.
 
Consolidated principles

     On April 9, 1996, the Company formed a wholly owned  subsidiary,  Satellite
Network  Television  (SNT),  by issuing  1,000,000  common  stock shares to ITC.
Through  October 1996,  when the Company and SNT  encountered  problems with its
leased  equipment  and New Jersey  facilities  (Notes 3 and 4),  SNT  operated a
television  studio,  a post  production  facility and satellite  link  producing
commercials,  infomericals,  business videos, commercial programming, and remote
broadcasts  for  both  the  Company's  Rebate  TV  operations  and  for  outside
customers.  These operations have ceased and management does not anticipate them
to resume.

     The  accompanying  consolidated  financial  statements  include the general
accounts of the Company,  SNT and AIC and its  subsidiaries for the three months
ended August 31, 1998. All material intercompany accounts and balances have been
eliminated in the consolidation.

                                       7
<PAGE>
                   INTERACTIVE TECHNOLOGIES CORPORATION, INC.
                                AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS


Impairment of long-lived assets

     Effective  January 1, 1996,  the Company  adopted  Statement  of  Financial
Accounting  Standards  ("SFAS")  No.  121,  "Accounting  for the  Impairment  of
Long-Lived  Assets and for Long-Lived  Assets to Be Disposed Of." This Statement
establishes  accounting  standards  for the  impairment  of  long-lived  assets,
certain identifiable intangibles and goodwill related to those assets to be held
and used,  and  long-lived  assets and certain  identifiable  intangibles  to be
disposed of. The Company periodically  evaluates,  using independent  appraisals
and projected  undiscounted  cash flows,  the carrying  value of its  long-lived
assets and certain identifiable  intangibles to be held and used whenever events
or changes in  circumstances  indicate that the carrying  amount of an asset may
not be recoverable. In addition,  long-lived assets and identifiable intangibles
to be disposed of are reported at the lower of carrying value or fair value less
cost to sell.

Amortization

     Organizational  costs are being  amortized  using the straight  line method
over five years.

     License  rights are being  amortized over the initial five year term of the
licenses.  Although they are renewable at no additional consideration,  there is
no guarantee the Company will renew these licenses. At fiscal year ended May 31,
1998 these assets were reclassified as assets of discontinued  operations,  held
for  resale.   For  the  three  months  ended  August  31,  1998  no  additional
amortization was booked.

Inventories

     Inventories  are  carried  at the  lower  of cost or net  realizable  value
(market) and include  component parts used in the assembly of the Company's line
of air purification  units and filters and finished goods comprised of completed
products.  The costs of inventories  are based upon specific  identification  of
direct costs and allocable  costs of direct labor,  packaging and other indirect
costs.

Property and equipment

     Property and  equipment are stated at cost less  accumulated  depreciation.
Depreciation  of property and equipment is currently  being provided by straight
line  and  accelerated   methods  for  financial  and  tax  reporting  purposes,
respectively, over estimated useful lives of five years.

Capitalized software expenditures

     Software  and  trademark  costs are  amortized,  pursuant to  Statement  of
Financial  Accounting Standards No. 86, at an annual amount equal to the greater
of the amount  computed  using (a) the ratio that current gross revenues bear to
the  total  of  current  and  anticipated  future  gross  revenues  or  (b)  the
straight-line  method over a seven year estimated  economic life beginning April
18,  1996.  At May  31,  1998  these  assets  were  reclassified  as  assets  of
discontinued  operations,  held for resale.  No amortization  was booked for the
three months ended August 31, 1998.

Intellectual properties

     In its  acquisition  of AIC  the  Company  purchased  certain  intellectual
properties.  Costs incurred by the Company in developing its products consisting
primarily of design,  testing and  completion of working  prototypes,  which are
considered patentable,  are capitalized and will be amortized over the estimated
useful life of the related patents once a unit has been placed in production.

                                       8
<PAGE>
                   INTERACTIVE TECHNOLOGIES CORPORATION, INC.
                                AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS


Revenue recognition

     Revenues from the Company's RebateTV  operations are recognized at the time
production and related services are provided.

Advertising

     The  Company's  advertising  costs,  which consist of radio airtime for the
Rebate TV operations, are charged to expense when incurred.

Management estimates

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

Cash flow

     For purposes of the statement of cash flows,  cash includes demand deposits
and time  deposits  with  maturities  of less  than  three  months.  None of the
Company's cash is restricted.

Earnings per share

     Basic and diluted  earnings per share amounts are based upon 48,229,616 and
13,479,613,  respectively,  weighted  average  shares of common stock and common
stock equivalents outstanding.  No effect has been given to the assumed exercise
of stock options and warrants as the effect would be antidilutive.

2.        PREFERRED STOCK

Convertible preferred stock - Series A

     In connection  with the Company's  acquisition of AIC (Note 1), the Company
established this equity class and authorized  15,000,000 shares. The shares have
a par value of $1.00,  do not pay dividends and are convertible at the Company's
option  at any  time  within  24  months  after  issuance  for one  share of the
Company's common stock.

Convertible preferred stock - Series M

     During the year ended May 31,  1998,  the Company  established  this equity
class and authorized 5,000,000 shares.  During the period ended August 31, 1998,
112,500 of these  shares were issued for $1.00 cash,  or $112,500  net of costs.
The shares have a par value of $.001,  do not pay dividends and are  convertible
at the  Company's  option at any time within 36 months  after  issuance  for one
share of the Company's common stock. In addition,  attached to each share is one
warrant  to  purchase  one share of  common  stock at a price of $2.00 per share
exercisable within two years after issuance.  This offering was ended as of July
31, 1998.

                                       9
<PAGE>
                   INTERACTIVE TECHNOLOGIES CORPORATION, INC.
                                AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS


3.        NOTES RECEIVABLE

     Notes  receivable  relate to AIC sales of area  franchises  (Note 1),  bear
interest  at 6% to 8%,  are  payable in terms  ranging  from 12 to 36 months and
secured by the area franchises.  Credit is extended on evaluation of the payee's
financial condition and general credit information.

At August 31, 1998, notes receivable are comprised of the following:

         Domestic notes receivable                  $    300,000
         Foreign notes receivable                        666,500
                                                         966,500
         Less:  Current maturities                   (    66,667)

                                                    $    899,833

4.       NOTES PAYABLE

     The Company's notes payable consist of loans from various  corporations and
individuals  provided for working capital purposes.  The notes, which contain no
significant  restrictions,  bear  interest  at rates of 10.0% to 18.0%,  are due
through May 1999 and are unsecured.

5.       CONVERTIBLE DEBENTURES

     In  connection  with the  Company's  acquisition  of AIC,  the Company also
issued  $9,000,000  of  convertible  debentures  secured  by the  shares  of AIC
acquired. The debentures bear interest at 10% payable annually on May 31 of each
year, are due on May 31, 2000 and are convertible at the Company's option at any
time  within  the two years  into  shares  of the  Company's  common  stock at a
conversion  price of $.70.  These  convertible  debentures  were  converted into
common stock as of July 31, 1998.

6.       COMMITMENTS AND CONTINGENCIES

Operating leases

     The Company is currently  obligated under a noncancellable  operating lease
for its Dallas office  facilities  which  expires in May 2000.  The Company also
leased  facilities in Florida under a  non-cancelable  operating lease agreement
which  expired in April 1998.  From May 1996 through  August  1996,  the Company
leased  facilities in New Jersey in connection with its SNT operations  (Notes 1
and 3).

     Minimum future rental payments  required under the above operating lease is
as follows.

                   Year Ending
                     May 31,                    Amount

                       1999                  $     47,748
                       2000                        47,748

                                             $     95,496


                                       10
<PAGE>

                   INTERACTIVE TECHNOLOGIES CORPORATION, INC.
                                AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS

Capital lease obligations

     On March 27, 1996, the Company  acquired  various studio  equipment under a
capital  lease  obligation  payable  monthly  through  March  2001 with  imputed
interest at 11.0%,  secured by the equipment and 250,000  common stock shares of
the   Company.   As   part  of  the   transaction,   the   stockholder   of  the
lessor/corporation  purchased  50,000  common  stock  shares of the  Company for
$200,000  cash and received  warrants to purchase  50,000 common stock shares at
$2.00 per share.  At May 31,  1996,  the cost of equipment  acquired  under this
lease and related  accumulated  depreciation  totaled  $1,100,000  and  $26,190,
respectively.

     During the year ended May 31, 1997,  the Company  withdrew  from this lease
obligation, resulting in a lawsuit, (Notes 1 and 7) and wrote off the $1,100,000
capitalized cost of the equipment,  $77,435 of additional related equipment, the
related accumulated  depreciation of $56,068 and all but $218,750 of the related
capital  lease  obligation.  On November 30, 1997, in settlement of the lawsuit,
the  Company  issued  675,000  shares of its  common  stock at $.32 per share in
complete satisfaction of this remaining capital lease obligation.

License fees payable

     The  Company  has  acquired   licenses  from  the  Federal   Communications
Commission  to operate  interactive  video and data  service  systems in various
metropolitan statistical areas (Note 1). The license rights are payable interest
only, at 7.7 percent for two years with principal and interest  payable  monthly
over the remaining  three years of the licenses.  Interest has been accrued from
the dates the licenses were formally issued. An extension of time until December
1998 for making payments has been granted by the FCC.

     Future principal payments under the remaining Titusville,  FL license right
obligation are as follows:

                           Year Ending
                             May 31,                   Amount

                               1999                  $   210,077
                               2000                      183,113
                               2001                      146,810

                                                     $   540,000

Contract of sale deposit

     In October 1994, the Company entered an agreement with a Nevada corporation
to sell its  Charleston,  South  Carolina  license  rights  (Note 1), net of the
related obligation assumed,  for $500,000 cash. The Company also retained 10% of
the gross profits derived from the operations under the license rights.

     Through May 31, 1996,  $401,901 was advanced to the Company pursuant to the
terms of this  agreement  and was  reflected  as a liability  until the sale was
effective, pending approval by the FCC.

     During the year ended May 31,  1997,  FCC approval was granted and the sale
was completed. The difference between the $500,000 sales price, the net carrying
value of the license rights and the remaining license rights obligation  assumed
are reflected in the accompanying consolidated financial statements as a gain.


                                       11
<PAGE>
                   INTERACTIVE TECHNOLOGIES CORPORATION, INC.
                                AND SUBSIDIARIES


Employment agreement

     The Company is currently  obligated  under  employment  agreements with two
members of executive  management for annual  compensation  totaling $500,000 and
discretionary  bonuses  determined  by the Company's  board of  directors.  This
agreement was amended effective June 1, 1998 reducing the annual compensation to
$240,000 for years beginning after this amendment.

     The  Company's  current  compensation  benefits  do not  provide  any other
post-retirement or post-employment benefits.

Year 2000 computer compliance

     The Company is currently  using computer  hardware and software that is not
in  compliance  with the year 2000 dating  issues.  However,  new  software  and
hardware  components  have been  ordered  that will  enable the Company to be in
compliance  prior to December 31, 1998.  During the year ended May 31, 1998, the
Company  incurred  approximately  $15,000  of  costs  related  to  this  effort.
Management does not believe any additional significant cost will be incurred and
the accompanying  consolidated  financial  statements do not contain any reserve
for this contingency.

7.       LITIGATION

Rental operating lease

     The Company is  defendant,  and it has filed counter  claims,  in a lawsuit
filed by the  lessor of office  space  facilities  in New  Jersey  (Note 6). The
Company never occupied the space due to the lessor's  failures to finish out the
space to the  Company's  specifications.  The lessor seeks to recover  remaining
lease  payments due under the lease of $606,913 and the Company seeks to recover
damages under a capital lease obligation  (Note 6) for equipment  located in the
New Jersey  facilities and  contractually  precluded from being removed from the
facilities.  Although the Company  anticipates  a favorable  settlement  of this
lawsuit the outcome of it is uncertain. The accompanying  consolidated financial
statements do not contain any reserve for this contingency.

Capital lease obligation

     The Company was defendant,  and it had filed counter  claims,  in a lawsuit
filed by the lessor of equipment subject to a capital lease obligation (Note 6).
The Company withdrew from the lease because of the lessor's inability to correct
defects  in a  major  revenue  producing  component  of the  equipment  and  the
inability to use the equipment.

     The lessor  sought to recover lease  payments due under the lease  totaling
$1,043,021  and the  Company  sought  to  recover  lost  revenues  caused by the
deficient  equipment.  On August 21,  1997,  the Company  settled  this  lawsuit
agreeing to issue  350,000  common stock shares (plus an  additional  162,500 or
325,000  shares if the Company fails to file a  Registration  Statement with the
S.E.C.  by December 1, 1997 or January 2, 1998,  respectively).  The  settlement
loss was valued at the $.625  August  21st  closing  price of the  common  stock
shares, or $218,750, and is recorded in the accompanying  consolidated financial
statements by reducing the carrying value of the capital lease obligation at May
31, 1997 to $218,750.  On November 30, 1997, in  settlement of the lawsuit,  the
Company  issued 675,000 shares of its common stock at $.32 per share in complete
satisfaction of this remaining capital lease obligation.

                                       12
<PAGE>

                   INTERACTIVE TECHNOLOGIES CORPORATION, INC.
                                AND SUBSIDIARIES


8.       INCOME TAXES

     The Company used the accrual  method of  accounting  for tax and  financial
reporting purposes. At May 31, 1998 and 1997, the Company had net operating loss
carryforwards  for  financial  and  tax  reporting   purposes  of  approximately
$8,500,000 and $7,000,000,  respectively. These carryforwards expire through the
year 2012, and are further  subject to the  provisions of Internal  Revenue Code
Section 382.

     Pursuant to  Statement  of  Financial  Accounting  Standards  No. 109,  the
Company has recognized a $2,909,184  deferred tax asset  attributable to the net
operating loss carryover,  net of a $105,129  deferred tax liability  related to
amortization  timing  differences,  in the amount of $2,804,055  which have been
fully offset by a valuation allowances in the same amount, as follows:

 
                                        1998                  1997

      Beginning balance              $  2,267,331       $    1,469,703
      Increase during period              536,724              797,628

        Ending balance               $  2,804,055       $    2,267,331


     The Company has also  recognized a deferred tax liability of $6,487,072 for
the  differences  between  the  assigned  values  and the tax  bases  of  assets
recognized in the acquisition of AIC (Note 1).

     A  reconciliation  of income tax expense at the  statutory  federal rate to
income tax expense at the  Company's  effective tax rate for the years ended May
31, 1998 and 1997 is as follows:
 
                                                1998               1997


 Tax benefit computed at statutory 
     federal rate                       $(     523,462)      $(     902,757)
 NOL carryover                                 523,462               902,757

    Income tax expense                  $            -       $            -




                                       13
 
<PAGE>

                   INTERACTIVE TECHNOLOGIES CORPORATION, INC.
                                AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS

9.       FINANCIAL INSTRUMENTS

     The Company's financial instruments consist of its cash, accounts and notes
receivable,  trade and its  notes,  license  rights and  convertible  debentures
payable.

Cash

     The Company maintains its cash in bank deposit and other accounts which, at
times, may exceed federally insured limits.  The Company has not experienced any
losses in such accounts, and does not believes it is subject to any credit risks
involving its cash.

Accounts and note receivable, trade

     The Company  accounts and note receivable are unsecured and represent sales
not collected at the end of the year.  Management  believes  these  accounts and
note receivable are fairly stated at estimated net realizable amounts.

Convertible debentures payable

     Management   believes  the  carrying  value  of  their  debentures  payable
represents the fair value of these financial instruments because their terms are
similar to those in the  lending  market for  comparable  loans with  comparable
risks.

Notes payable and license rights payable

     Management  believes the carrying  value of their notes payable and license
rights payable represents the fair value of these financial  instruments because
their terms are similar to those in the lending market for comparable loans with
comparable risks.

10       DISCONTINUED OPERATIONS

     In  February  1998,  the  Company  formally   discontinued  its  Rebate  TV
operations  and  adopted a plan to dispose  of the only  asset of this  business
segment, the proprietary software and trademark. The Company also adopted a plan
to dispose of its FCC license rights,  the only asset of its  interactive  video
and data services business segment, which never operational.  Management expects
to sell these assets by May 31, 1999.

     The accompanying consolidated statement of operations reflects the revenues
and  expenses of the  Company's  Rebate TV business  segment,  the only  segment
operated during the periods presented.

     At May 31,  1998,  net  assets of these  discontinued  operating  segments,
stated at the  lower of cost or net  realizable  value,  were  comprised  of the
following:

                                                           1998          1997
 
    License rights, net of $438,760 and $303,750,
      respectively of accumulated amortization and
      net of license rights payable of $540,000      $(  303,750)   $(  168,750)
    Proprietary software and trademark, net of
      $1,643,531 and $870,525, respectively,
      of accumulated amortization                       3,767,512     4,540,518

    Income tax expense                               $  3,463,762   $ 4,371,768



                                       14
<PAGE>

                   INTERACTIVE TECHNOLOGIES CORPORATION, INC.
                                AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS


11.      SUBSEQUENT EVENT


     On August  31,  1998,  the  Board of  Directors  authorized  a five for one
reverse stock split of the Company's  common stock shares.  This matter has been
submitted to  stockholders  for vote and approval is  anticipated  by October 5,
1998.  This  actions was  approved at the  stockholders  meeting as was the name
change to Airtech Group, Inc., and the NASDAQ trading symbol was changed to AIRG
following this approval by the stockholders.

12.      STOCK OPTIONS AND WARRANTS

     During the years ended May 31, 1998 and 1997,  the Company  issued  various
stock options and warrants to employees and others and uses the intrinsic  value
method of  accounting  for these stock  options.  Compensation  cost for options
granted has not been recognized in the accompanying financial statements because
the amounts are not material.  The options and warrants  expire between  January
1999 and May 2002 and are exercisable at prices from $.75 to $4.50 per option or
warrant. Exercise prices were set at or above the underlying common stock's fair
market value on the date of grant.

     The following is a schedule of the activity relating to the Company's stock
options and warrants.  Other than the 1,029,500 and 1,200,000 warrant identified
below as granted during the year ended May 31, 1998 and 1997, respectively (Note
4), all other amounts relate to stock options the Company has issued.

                               May 31, 1998                  May 31, 1997
                               ------------                  -------------
                                      Weighted Avg.                Weighted Avg.
                            Shares      Exercise        Shares       Exercise
                          (x 1,000)      Price        (x 1,000)        Price
                          ---------   -----------     ---------       --------
Options and warrants
  outstanding at
  beginning of year          1,369       $  1.08           169         $   2.79
Granted                      1,030       $  2.00         1,200         $    .83
Exercised                        -                           -
Expired                          -                           -
Options and warrants
  outstanding and
  exercisable at year end    2,399       $  1.47         1,369         $   1.08
                             =====                       =====
Weighted average fair value 
  of options and warrants 
  granted during the year                $   .60                       $    .13

     The  following  table  summarizes  information  about the  Company's  stock
options and warrants outstanding at May 31, 1998, all of which are exercisable.

                                            Weighted Average
           Range of           Number           Remaining        Weighted Average
        Exercise Prices     Outstanding     Contractual Life     Exercise Price
           $.75-1.00           1,200           4.0 years                 $  .83
              $2.00             1145           2.1 years                 $ 2.00
              $4.50               54           2.0 years                 $ 4.50

     The following pro forma disclosures  reflect the Company's net loss and net
loss per share amounts assuming the Company  accounted for stock options granted
using the fair value  method  pursuant  to  Statement  of  Financial  Accounting
Standards  No. 123. The fair value of each option  granted was  estimated on the
date of grant using the  Black-Scholes  option  pricing model with the following
assumptions:  risk-free interest rate of 5.6%; no expected  dividends;  expected
lives of 3 to 6 years; and expected volatility of 153.4%.
                                              
                                           May 31, 1998        May 31, 1997

           Net loss                     $(   1,552,736)       $(   2,811,167)
           Net loss per share           $(         .11)       $(         .23)

     During  the year  ended May 31,  1998 and 1997,  the  Company  also  issued
294,558 and 248,021 common stock shares, respectively, in exchange for services.
These  services  were  recorded  at their fair value of $169,475  and  $545,520,
respectively, and were charged to expense.


                                       15
<PAGE>

     Pursuant to the  requirements of the Securities Act of 1933, the registrant
certifies  that it has  reasonable  grounds to believe  that it meets all of the
requirements  for filing and has duly caused this  registration  statement to be
signed on its behalf by the undersigned,  thereunto duly authorized, in the City
of Melbourne, State of Florida, on January 14, 1998.


 

                              Interactive Technologies Corporation, Inc.


                              by: /s/ CJ Comu
                                  ---------------------------
                                  CJ Comu, Chief Executive Officer
















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<PAGE>