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 31, 1997                                              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)


                         102 South Harbor City Boulevard
                            Melbourne, Florida 32901
                    (address of Principal Executive Offices)

                                  407-953-4811
               (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 12,279,612  shares of common stock,  par value $0.01 per
   share issued and outstanding as of August 31, 1997.

   Traditional Small Business Disclosure Format

                          Yes _____X_____ No __________









           



                                                           
<PAGE>


                   Interactive Technologies Corporation, Inc.

                                Table of Contents


   PART I - FINANCIAL INFORMATION                                      Page No.


   Item 1.   Financial Statements                                      2-12    
             Balance Sheet as of  August 31, 1997               
               Statement of Operations for the three
                    months ended August 31, 1997 
                    and August 31, 1996
               Consolidated Statement of Stockholders' Equity
               Statement of Cash Flows for the three months
                    ended August 31, 1997 and
                    August 31, 1996
               Notes to Financial Statements

   Item 2.   Management's Discussion and Analysis and                  13-14   


   PART II - OTHER INFORMATION                                             


   Item 1.   Legal Proceedings                                         15 
  
   Item 2.   Changes in Securities                                     None

   Item 3.   Defaults upon Senior Securities                           None
   
   Item 4.   Submission of Matters to a Vote of Security Holders       None
   
   Item 5.   Other Information                                         None 

   Item 6.   Exhibits and Reports on Form 8-K                          None

   SIGNATURE PAGE                                                      16


























                                       1
<PAGE>


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


                   INTERACTIVE TECHNOLOGIES CORPORATION, INC.
                                 AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS
                            AUGUST 31, 1997 and 1996


                                     Assets


                                                     August 31,      August 31,
                                                       1997             1996
                                                       ----             ----

Current assets:

         Cash                                         $11,009         $14,695
         Accounts and note receivable, trade,                          24,167
           net of $25,000, of allowance for 
           uncollectible amounts                       42,165               -   
         Prepaid expenses and other assets             15,406          15,593  
                                                    ---------        --------

          Total current assets                         68,580          54,455
                                                    ---------        --------

Property and equipment, at cost, net of
  $34,270 and $13,138, respectively of 
  accumulated depreciation                             80,871         101,692   
                                                    ---------        --------

Other assets:

         Organizational costs, net of $2,534
           and $1,734, respectively of 
           accumulated amortization                     1,466           2,266 
         Investment in Subsidiary - SNT                     -         314,899 
         License rights, net of $337,500
           and $294,334, respectively of 
           accumulated amortization                   337,500         670,666 
         Proprietary software and trademark,
           net of $1,063,776 amd 289,877,
           respectively of accumulated 
           amortization                             4,347,266       5,121,165
                                                    ---------       ---------

                                                    4,767,103       6,108,996
                                                    ---------       ---------

                                                   $4,835,683      $6,265,143 
                                                   ==========      ========== 












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




                                       2

<PAGE>



                   INTERACTIVE TECHNOLOGIES CORPORATION, INC.
                                 AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS
                            AUGUST 31, 1997 AND 1996


                      Liabilities and Stockholders' Equity



                                                    August 31,    August 31,
                                                       1997          1996 
                                                       ----          ----    

Current liabilities:

         Accounts payable, trade                   $ 127,812      $ 225,023
         Accrued expenses                             67,862         77,683     
         Contract of sale deposit                          -        500,000  
         Notes payable                               274,685  
         Loans Payable
           Related Parties
           Others                                                   252,462 
         Current portion of long-term
           liabilities                               210,077        171,227 
                                                   ---------       --------

           Total current liabilities                 680,436     $1,226,395 
                                                   ---------     ----------

Long-term liabilities:

         License rights payable                      329,923        499,573     
         Capital lease obligation                    218,750              -     
         Convertible debentures payable                    -        800,000 
                                                   ---------      ---------    

                                                     548,673      1,299,573    


Commitments and contingencies:                                           

Stockholders' equity:

         Common stock, $.01 par value 
         50,000,000 and 12,500,000 shares  
         authorized, respectively
         13,479,613 and 11,866,491, 
         respectively, shares issued
           and outstanding                           134,796        118,665 
         Paid in capital in excess of par         10,836,034      8,796,652     
         Accumulated deficit                     ( 7,364,256)    (5,176,142)
                                                 ------------    -----------

                                                   3,606,574      3,739,175 
                                                 ------------    -----------
                                                 $ 4,835,683    $ 6,265,143   
                                                 ============   ============    





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




                                       3
<PAGE>


               Interactive Technologies Corporation, Incorporated
                              Statements of Operations
               For the Three Months Ended August 31, 1997 and 1996


                                                 AUGUST 31,       AUGUST 31, 
                                                    1997             1996    
                                               -------------     -----------    
                                                 (unaudited)     (unaudited) 
                                               -------------     -----------

Revenue                                         $     3,070      $   12,835     
                                               -------------     ----------- 


Operating expenses:
     Depreciation                                     5,414           5,403  
     Amortization                                   227,202         240,809
     Production costs                                   912               -  
     General and administrative                     104,704         658,175
     Interest expense:                                                        
          Stockholder                                     -               -
          Other                                      12,264               -    
     Management fee-stockholder                           -               -
                                               -------------    -----------
                                                    350,496         904,387  

                                               -------------    ----------- 
Loss from operations                               (347,426)       (891,552) 

Income/(loss) before income taxes                  (347,426)       (891,552) 

Provision for income taxes                                -               - 
                                               -------------    ----------- 

Net income/(loss)                              $   (347,426)    $  (891,552) 
                                               =============    =========== 



Net income/(loss) per share

             Primary                           $      0.03      $    0.08   
             Diluted                           $      0.03      $    0.08  






















       Accompaning notes are an integral part of the financial statements.



                                       4
<PAGE>

                   INTERACTIVE TECHNOLOGIES CORPORATION, INC.
                                 AND SUBSIDIARY
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                        THREE MONTHS ENDED AUGUST 31, 1997


                               Common Stock   Add'l Paid  Accumulated
                            Shares    Amount  In Capital   Deficit      Total
                            ------    ------  ----------   -------      -----

Balance at May 31, 1995  5,689,544  $ 56,895 $3,192,082  $(3,914,063) $(665,086)

Issuance of common stock 
   for cash                102,500     1,025    408,975        -        410,000

Issuance of common stock 
   in reverse acquisition 
   transaction           5,700,000    57,000  4,793,683        -      4,850,683

Issuance of common stock 
   as security for capital 
   lease obligation        250,000     2,500  (   2,500)       -              -

Net loss                         -         -          -   (   47,599)  (447,599)
                          --------  --------   ---------  -----------  ---------

Balance at May 31, 1996 11,742,044   117,420  8,392,240   (4,361,662) 4,147,998

Issuance of common stock 
     for cash              289,549     2,895    749,978         -       752,873

Issuance of common stock
     in exchange for 
     services              248,021     2,481    543,039         -       545,520

Issuance of common stock 
     upon conversion of 
     debt                1,199,999    12,000  1,150,777         -     1,162,777

Net loss                         -         -          -   (2,655,167)(2,655,167)
                         ---------    ------  ---------   ----------- ----------

Balance at May 31,1997  13,479,613 $134,796  $10,836,034 $(7,016,829) $3,954,001

Net Loss                                                  (  347,426) ( 347,426)
                        ========== ========  ===========  =========== ==========
Balance at Aug 31,1997  13,479,613 $134,796  $10,836,034 $(7,364,255) $3,606,575










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

                                       5

<PAGE>
 
               Interactive Technologies Corporation, Incorporated
                             Statement of Cash Flows
               For the Three Months Ended August 31, 1997 and 1996


                                                   August 31,       August 31,
                                                      1997            1996
                                                  ------------     ----------- 
                                                   (unaudited)     (unaudited) 
                                                  ------------     -----------

    Cash received from customers                  $   111,561      $   19,232 
    Cash paid to employees                          (  43,056)      ( 204,084)
    Cash paid to suppliers                          ( 108,837)      ( 388,845)
    Interest paid:
      Stockholder                                           -               -
      Others                                        (  12,264)      (     909)
                                                  ------------     -----------
 Net cash used in operating activities            $ (  52,596)     $ (574,607)
                                                  ------------     -----------
                                               
Cash flows from investing activities:
    Purchase of property and equipment                               (    664)
    Capitalized software development reduction                         50,000 
                                                  ------------     -----------
 Net cash used in investing activities                             $   49,336   
                                                  ------------     -----------

Cash flows from financing activities:
    Issuance of convertible debentures                      -         300,000
    Proceeds from note payable
       stockholder corporation                                          
    Common stock issued for cash                            -          61,602
    Promissory notes isssued for cash                  50,000         252,462 
    Contract of sale deposits received                                 98,099
    License rights payment                                  -        (232,000)
                                                  ------------     -----------
 Net cash provided by financing activities             50,000         480,163  
                                                  ------------     -----------

Net change in cash                                    ( 2,596)        (45,108) 
Cash at beginning of period                            13,605          63,114
                                                  ------------     -----------

Cash at end of period                             $    11,009      $   18,003
                                                  ============     =========== 

















       Accompaning notes are an integral part of the financial statements.



                                      6
<PAGE>


                   Interactive Technologies Corporation, Inc.
                             Statement of Cash Flows
               For the Three Months Ended August 31, 1997 and 1996

                    Reconciliation of Net Income to Net Cash
                          Used in Operating Activities


                                                   AUGUST 31,      AUGUST 31,  
                                                      1997           1996     
                                                  -------------   ----------- 
                                                   (unaudited)    (unaudited) 
                                                  -------------   ----------- 
Net income/loss                                   $ (  347,426)   $  (891,552)

Adjustments to reconcile net
 income/loss to net cash used in
 operating activities:
    Amortization                                       227,202        240,809 
    Depreciation                                         5,414          5,403
    Increase/Decrease in accounts receivable           108,491       (  7,214)
    Increase in Investment in subsidiary                     -       (222,204)
    Decrease in accounts payable                    (   44,845)      (138,250)
    Increase in prepaid expenses                    (      616)      (  8,275) 
    Increase/Decrease in accrued expenses           (      816)       102,619 
    Stock issued for supplies and services                   -        344,057
                                                   ------------    ----------
   Total adjustments                               $   294,830     $  316,945 
                                                   ------------    ----------

    Net cash used in operating activities          $ (  52,596)    $ (574,607) 
                                                   ============    =========== 




































       Accompaning notes are an integral part of the financial statements.




                                       7
<PAGE>
                   INTERACTIVE TECHNOLOGIES CORPORATION, INC.
                          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.  On October  20,  1995,  the  Company
entered  into  a  reverse   acquisition   transaction,   described  below,  with
Syneractive,  Inc. (SI). SI was  incorporated  in the state of Florida on August
31, 1995.  Prior to October 20, 1995,  the Company was engaged  primarily in the
business of exploiting its rights under a license  granted by CST  Entertainment
Imaging,  Inc.  The license  gave the Company  the  exclusive  right to colorize
black-and-white film and videotape,  including black-and-white  theatrical films
and  television  programs,  which  were  originally  produced  for  distribution
primarily within European countries. However, the Company abandoned the business
of exploiting  the license (see Note 3) on October 18, 1995 as a result of being
unable to realize any revenue  from the  license.  SI,  which was  acquired in a
reverse  acquisition,  obtained  license rights from the Federal  Communications
Commission to operate  interactive  and data service systems in the Charleston -
North Charleston, SC and Melbourne - Titusville, Florida metropolitan areas.

     Syneractive,  Inc. also acquired 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 rebate 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 April 15, 1996
and  serve   customers  in  the  eastern  United  States.   Management   expects
exploitation  of the FCC  licenses to commence in 1997.  They intend to hire the
necessary management  personnel,  raise addition capital and generate profitable
operations needed to continue its existence.

     Syneractive, Inc. was dissolved on October 30, 1995.

Reverse acquisition
-------------------

     On October 1, 1995, the Company issued  5,700,000 shares of common stock to
its current  sole  director  and  officer in exchange  for the net assets of SI.
After the issuance of such stock, the current  director and officer  effectively
controlled the Company,  holding  approximately  50.1% of the outstanding common
stock.

     Prior to the reverse acquisition,  the current sole director and officer of
the Company owned all of the outstanding  common stock of SI.  Accordingly,  the
reverse  acquisition has been accounted for at the historical cost of the assets
acquired.

Basis of Presentation
---------------------

     The  financial  information  presented as of any date other than May 31 has
been  prepared  from the books  and  records  without  audit.  The  accompanying
financial  statements have been prepared in accordance with the  instructions to
Form 10QSB and do not include all of the information and the footnotes  required
by generally  accepted  accounting  principals for complete  statements.  In the
opinion of management,  all  adjustments,  consisting  only of normal  recurring
adjustments,  necessary for a fair  presentation  of such financial  statements,
have been included.

     These  financial   statements  should  be  read  in  conjunction  with  the
consolidated  financial  statements and notes thereto for the year ended May 31,
1996 contained in the Company's 10KSB Annual Report.

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.

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

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

Primary and fully diluted  earnings per share amounts are based upon  13,479,613
and 11,866,491, 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 and convertible  debentures as the effect would be
antidilutive.

In February  1997,  the  Financial  Standards  Accounting  Board  (FASB)  issued
Statement of Financial Accounting Standards No. 128 Earnings Per Share effective
for  financial  statement  periods  ending  after  December  15,  1997.  Earlier
application is not permitted.  For pro forma  disclosure  purposes,  there is no
difference in the amounts of net loss per share and weighted  average  shares of
common  stock  outstanding  computed  using FASB 128 and those  reflected in the
accompanying financial statements.

2.       COMMITMENTS AND CONTINGENCIES

Operating leases

Through  October 31, 1995, the Company used office space provided free of charge
by its stockholder,  the value of which was not material.  The Company presently
leases its facilities in Florida under non-cancelable operating lease agreements
expiring through April 1998. From May 1996 through August 1996, the Company also
leased  facilities in New Jersey in connection with its SNT operations  (Notes 1
and 3). For the years  ended May 31,  1997 and 1996,  rent  expense  under these
leases totaled $62,803 and $24,603, respectively.

Minimum future rental payments  required under the above operating leases are as
follows.

                          Year Ending
                            May 31,                           Amount

                              1998                         $   22,464
                                                            =========


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 3) 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.

License fees payable

The Company,  through SI, 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.

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


During the year ended May 31, 1997, the Company  received the remaining  amounts
due under a contract of sale for the North  Charleston,  SC license rights (Note
1) and the sales transaction was completed.


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

                           Year Ending
                             May 31,                         Amount

                               1998                      $   210,077
                               1999                          183,113
                               2000                          146,810
                                                         -----------
                                                         $   540,000

Employment agreement

During the year ended May 31,  1996,  the  Company  entered  into an  employment
agreement,  with a director and principal  member of management,  which provided
for  annual  compensation  equal to 5% of the gross  profit  from the  Rebate TV
operations,  with a minimum salary for the first year of $125,000.  In addition,
the Company provided a monthly  automobile  allowance.  The agreement expired in
October  2005,  and  provided  for  full  payment  if the  employees  should  be
terminated without cause, become disabled,  or die before such date. In November
1996 the  employee  left the Company  and has since filed a lawsuit  claiming an
unspecified  amount of damages for breach of  contract.  The first year  minimum
compensation  required  under  the  agreement  was  paid in  full.  The  Company
anticipates  a  favorable  outcome  to  this  litigation  and  the  accompanying
financial statements do not contain any reserve for this contingency.

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

3. 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 2). 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 2) 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 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 2). 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 financial statements by
reducing the carrying  value of the capital lease  obligation at May 31, 1997 to
$218,750.

                                       10
<PAGE>
                   INTERACTIVE TECHNOLOGIES CORPORATION, INC.
                                 AND SUBSIDIARY
                          NOTES TO FINANCIAL STATEMENTS

4.       CONVERTIBLE DEBENTURES

NONE

5.       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 March 1998 and are unsecured.

6.       RELATED PARTY TRANSACTIONS

Stockholder

The Company had a 50% interest in a joint  venture with another  corporation  to
exploit its license (Note 1) and accounted for this investment  using the equity
method.  At May 31, 1995, the joint venture had no assets and the carrying value
of its  investment  was $0. Also at May 31,  1995 the  Company  had  available a
$700,000  financing  arrangement  through  a  stockholder  corporation  with  an
interest rate of 12.5%. The amount outstanding at May 31, 1995 totaled $656,831.
The  stockholder  corporation  also charged a monthly  management  fee of $4,167
through  September  30, 1995. In October 1995 the Company sold its joint venture
interest in exchange  for its release  from the amount owed under the  financing
arrangement plus accrued interest and management fees through September of 1995,
resulting in a gain of $701,865,  the excess of these  amounts over the carrying
value of its investment in the joint venture.
     
7.  INCOME TAXES

The  Company  used  the  accrual  method  of  accounting  for tax and  financial
reporting  purposes.  At August 31,  1997,  the Company had net  operating  loss
carryforwards  for  financial  and  tax  reporting   purposes  of  approximately
$7,000,000.  This  carryforwards  expire  through the year 2011, 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 $2,385,722  deferred tax asset  attributable  to the net  operating
loss carryover, net of a $118,391 deferred tax liability related to amortization
timing differences,  in the amount of $2,267,331 which have been fully offset by
a valuation allowances in the same amount, as follows:
                                                         
                                            1997                1996
                                            ----                ----

        Beginning balance              $  1,469,703         $  1,330,781
        Increase during period              797,628              138,922
                                       ------------         ------------

        Ending balance                 $  2,267,331         $  1,469,703
                                       ============         ============


8.       FINANCIAL INSTRUMENTS

The Company's financial  instruments  consist of its cash, accounts  receivable,
trade and its 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.

                                       11
<PAGE>
                   INTERACTIVE TECHNOLOGIES CORPORATION, INC.
                                 AND SUBSIDIARY
                          NOTES TO FINANCIAL STATEMENTS

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.

9.       SUBSEQUENT EVENT

Subsequent to May 1997, the Company entered into an agreement to acquire Airtech
International  Corporation (AIC), a Texas  corporation,  through the issuance of
its common stock shares in a transaction  to be accounted as an  acquisition  by
ITC.  The  transaction  is subject to final AIC  stockholder  approval  upon the
effective date of a Form S-4 Registration Statement, which has been filed.




















































                                       12
<PAGE>
                      MANAGEMENT'S DISCUSSION AND ANALYSIS

INTERIM PERIOD FROM JUNE 1, 1996 THROUGH AUGUST 31, 1997.

     The  Company's  research and  development  efforts  consumed the  technical
efforts of the  Company  from  October  1995  through the airing of Rebate TV on
April 15, 1996, and involved two basic areas: the television programming for the
shows, and the data management and computer  interface  development  efforts for
the interaction with the retailers and the consumers.  None of this expense will
be borne  directly  by the  retailers  or the  consumers,  but will be  recouped
through profits as the Company expands its markets.

     Development of Rebate TV basic  programming by ITC has been done during the
fiscal year with Century III at Universal Studios, Florida. Established in 1976,
Century  III has  serviced a widely  diverse  client  base with high  production
values  utilizing  the  latest  and  finest in  production  and  post-production
hardware. This includes local, regional, national and international projects for
all  four  broadcast  television  networks,  national  cable  networks  such  as
Nickelodeon and HBO, major independent producers, advertising agencies and major
corporate and governmental  organizations such as Digital Equipment Corporation,
Harris Corporation,  General Electric,  NCR, AT&T, Kodak, Polaroid,  Walt Disney
World, Harcourt Brace Jovanovich,  FPL Group,  Westinghouse,  McDonnell Douglas,
Martin  Marietta,  Reebok,  International  and NASA.  The creative  director for
Rebate TV is Michael  Hamilton who has  designed,  directed  and  produced  such
television  series as "Magnum P.I.,  "Simon & Simon",  "Wings" and "The Twilight
Zone". His commercial experience includes such clients as Cadillac, Texaco, Coca
Cola, Heineken,  American Airlines,  Donna Karan, Elizabeth Arden, QVC, Business
Technology Management and the Family Channel.

     The  computer  development  efforts  related  to Rebate TV were done at the
Company's  engineering  offices in  Melbourne,  Florida,  where the hardware and
software  designs and  specifications  were  developed,  tested and  implemented
during the current fiscal year, to:

         (*)   manage the large amounts of data and transactions involved in 
               collecting and verifying sales information from the Rebate TV
               retailers;
         (*)   calculate the rebates, record the credits, and issue the checks
               to the consumer;
         (*)   accommodate and record the telephone rebate requests, and provide
               automated participation information to the public.

     Internet  Access.  ITC's  Internet  home pages for use with Rebate TV allow
viewers to access the program's  data base through the Internet.  It allows them
to view the status of their accounts, enter vendor rebate claims, and later will
allow  viewers to access a variety of  products  and  services  associated  with
Rebate TV which  the  Company  expects  to  include.  Rebate  TV is  located  at
http://www.rebatetv.com.

     Network  Operations.  ITC is in  development  and  production  of  its  own
television   channel  and  is  scheduled  to  distribute  its  Rebate  TV  video
programming  in this  format  to  customers.  The  Company's  distribution  plan
currently  provides for distribution of this programming  started in the central
Florida markets to expand from there. 

     In furtherance of its network creation activities, the Company initiated an
affiliate program by market  demographic  area. Under this program,  the Company
pre sells 10 of the 14 minute program  segments per one half hour program to the
affiliate in the  designated  market area who is  responsible  to local  program
affiliate operations. The initial affiliate market under this program is Dayton,
Ohio  however  this  market is not yet open and until the first 3-6  markets are
established in this manner, there is no assurance that any particular market can
or will get underway during this period. The Company will make a decision during
the next quarter whether or not to continue this method of expansion.

     The Company has negotiated a strategic  alliance with Bottom Line,Inc.,  an
Atlanta,  Georgia production andpost production facility and expects to move the
majority of its production to their  facilities  during the next 12 months.  The
Company has withdrawn from an undertaking  with  Satellite  Network  Television,
Inc. and will not be looking to those facilities for its production  services in
the future.





                                       13
<PAGE>

     Interactive  Video and Data  Services.  As part of ITC's  commitment to the
evolution  of  interactive  television,  its Federal  Communications  Commission
Interactive  Video  and  Data  Services  (IVDS)  radio  station  license  in the
Melbourne-Titusville-Palm  Bay,  FL  and  a  10%  interest  in  Charleston-North
Charleston,  SC  service  areas  represent  an  additional  enhancement  to  the
Company's programming distribution. These licenses have a duration of an initial
five years,  and are renewable if all conditions of the license are met. IVDS, a
two way  communications  system,  will allow  viewers to take an active  role in
systems  delivered  through broadcast  television,  cable  television,  wireless
cable,  direct broadcast  satellite or other future television delivery methods.
IVDS is regulated as a personal  radio  service under the rules of the FCC which
has  allocated  spectrum in the 218-219 MHz range for its use.  IVDS systems are
designed to operate with a hand-held  remote  control  device that  controls the
interactive  set top device on the  subscriber's  television set. A viewer would
interact with the TV station through a radio signal using an IVDS frequency.

     The Company is reviewing  alternative uses and equipment  proposals for its
Melbourne-Titusville-Palm  Bay,  FL license  and expects to proceed to install a
system for this license within the next 24 - 36 months.

     Although  ITC will run its Rebate TV and other  programs on its own service
area  systems,  the  programs  it  develops  are  intended  for  use on  various
interactive  delivery systems and are not specific to Interactive Video and Data
Services  systems.  They are marketed to all of these various delivery  systems.
For broadcast of Rebate TV programming  the Company  currently uses and plans to
use standard video media distribution methods such as cable, broadcast stations,
wireless cable and direct broadcast satellite. Although the Company has designed
its  programs to utilize an IVDS  return link (a "return  link" is the method by
which data is sent from the  consumer  or viewer back to the  originator  of the
program),  they are also designed to accommodate  other return links such as the
telephone.  The  Company  has  purchased  equipment  and  software  to provide a
telephone  return link as an interim  return  link for its own license  areas as
well as other areas where it is providing programming, to be utilized where IVDS
is not available; until the installation an operation of the IVDS equipment as a
return link is completed as well as for use with non subscribers to IVDS.

     Intellectual Content. The Company has developed a plan for the accumulation
and sale of intellectual  content.  This content takes several forms,  including
completed  television and video programming,  both developed and produced by the
Company  and  by  third  parties;   property   rights  to  written  scripts  and
publications  for the purpose of  producing  or having  produced  television  or
motion picture products; and program ideas, concepts and designs.

     This plan  commenced  during the last month of the fiscal year. In addition
to the Rebate TV  programs,  the  company has filed and had  accepted  Trademark
applications with the United States Patent and Trademark Office for "Rebate TV",
"Television  and pays you to shop"  and for  "DEAL!  DEALS!  DEALS!"  (a  direct
shopping program which the Company has produced).


FINANCIAL CONDITION AND RESULTS OF OPERATIONS:

     Revenues from  operations for the Quarter  reported were $3,070,  down from
$12,835 for the same period for the previous year. The Company has concluded its
beta test period for Rebate TV and is  preparing  for full  network  operations.
Operating  expenses for the Quarter reported decreased to $350,496 from $904,387
the previous  year.  Increased  expenses  were due to the  company's  operations
directed at  expansion  of Rebate TV into the  national  market.  The  Company's
computer  operations  were developed to operate at a level to service a national
market and those operations will make up a significant  portion of the operating
expenses which will proportionately decrease as the Company adds markets for its
productions.  The  Company  expects  its  expenses  to  expand  at a  decreasing
percentage as it expands into additional markets.

     During the first  three  months of the  current  fiscal  year,  the Company
received  $0 net of cost  from  the  private  sale of its  common  stock  and an
additional $50,000 in loans. The Company does not expect to receive  significant
revenues from projects other that Rebate TV during the next quarter. The Company
expects to require  additional  funds over the next 12 months for the  expansion
and addition of market for its products and operations.




                                       14
<PAGE>

PART II Other Information


Item l.  Legal Proceedings

     The  Company is a  defendant  in a  proceeding  filed in the United  States
District Court for the Southern  District of New York. It accepted service April
5, 1997 in an action  brought by  Studiolink  Corporation  and Steven Campus for
damages  arising out of an equipment  lease  agreement.  The Company  expects to
assert  counterclaims  against the Plaintiffs for losses suffered as a result of
their  failure to  perform.  Settlement  discussions  have been  ongoing and the
Company  expects  this matter to be settled in a manner not  unfavorable  to the
Company. In addition,  in related matters, the Company is in litigation with LLB
Realty,  L.L.C.  which has filed a claim  alleging  claims under an office lease
agreement  in  Superior  Court of New  Jersey,  Mercer  County.  The Company has
asseted claims against L.L.B.  Realty,  L.L.C.  for failure to perform under the
conditions of the agreement.  Settlement  negotiations have been ongoing and the
Company  expects  this  matter to be settled in a manner no  unfavorable  to the
Company.

     The Company is not as party to any other pending legal  proceedings  except
for claims and lawsuits  arising in the normal course of business.  ITC does not
believe  that these  claims or  lawsuits  will have a  material  effect on ITC's
financial condition or results of operations











































                                       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 April 14, 1997.


 

                              Interactive Technologies Corporation, Inc.


                              by: /s/ Perry Douglas West 
                                  ---------------------------
                                  Perry Douglas West, Chief Executive Officer



























                                       16
<PAGE>