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
   February 28, 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 14,870,171  shares of common stock,  par value $0.01 per
   share issued and outstanding  as of February 28, 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 - 10
                   Financial Statements
               Balance Sheet as of  February 28, 1998 and 1997
               Statement of Operations for the three
                    months ended February 28, 1998 and 1997
               Statement of Operations for the nine
                    months ended February 28, 1998 and 1997
               Consolidated Statement of Stockholders' Equity
               Statement of Cash Flows for the nine months
                    ended February 28, 1998 and  1997
               Notes to Financial Statements

 
   Item 2.   Management's Discussion and Analysis                      11


   PART II - OTHER INFORMATION


   Item 1.   Legal Proceedings                                         12
 
   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                                         12-18

               Interactive Technologies/Airtech International
                 Pro Forma Financial Information

   Item 6.   Exhibits and Reports on Form 8-K                          
               
               Airtech International Financial Statements              19-28

   SIGNATURE PAGE                                                      29









<PAGE>

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

                   INTERACTIVE TECHNOLOGIES CORPORATION, INC.
                           CONSOLIDATED BALANCE SHEETS
                           FEBRUARY 28, 1998 AND 1997
                                  (unaudited)

                                     Assets

                                                      1998              1997
                                                      ----              ----
Current assets:

         Cash                                        $ 66,244         $12,579
         Accounts and note receivable, trade,                          35,235
           net of $25,000, of allowance for
           uncollectible amounts                       39,650               -
            Notes receivable                                -         150,000
         Prepaid expenses and other assets            146,316           8,813
                                                    ---------        --------

          Total current assets                        252,210         206,627
                                                    ---------        --------

Property and equipment, at cost, net of
  $45,098 and $18,541, respectively of
  accumulated depreciation                             68,042          96,289
                                                    ---------        --------

Other assets:

         Organizational costs, net of $2,934
           and $2,134, respectively of
           accumulated amortization                     1,066           1,866
         License rights, net of $405,000
           and $270,000, respectively of
           accumulated amortization                   270,000         408,050
         Proprietary software and trademark,
           net of $1,450,279 and 676,380,
           respectively of accumulated
           amortization                             3,960,763       4,734,662
            Investment & Joint Venture                456,278               -
                                                    ---------       ---------

                                                    4,688,107       5,144,578
                                                    ---------       ---------

                                                   $5,008,359      $5,447,494
                                                   ==========      ==========


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


                                       1
<PAGE>
                                    
                   INTERACTIVE TECHNOLOGIES CORPORATION, INC.
                            CONSOLIDATED BALANCE SHEETS
                           FEBRUARY 28, 1998 AND 1997
                                  (unaudited)

                      Liabilities and Stockholders' Equity

                                                      1998          1997
                                                      ----          ----
Current liabilities:
         Accounts payable, trade                   $  78,262      $ 140,624
         Accrued expenses                             91,123         80,380
         Contract of sale deposit                          -              -
           Loans Payable
           Related Parties                                 -              -
           Others                                    277,185        144,200
         Current portion of long-term
           liabilities                               210,077        171,228
                                                   ---------       --------
           Total current liabilities                 656,647        536,432
                                                   ---------     ----------

Long-term liabilities:
         License rights payable                      329,923        499,573
           Convertible debentures payable                  -        800,000
                                                   ---------      ---------
                                                     329,923      1,299,573

Commitments and contingencies:

Stockholders' equity:
         Common stock, $.01 par value
           50,000,000 and 12,500,000 shares
           authorized, respectively
           14,870,171 and 12,159,863,
           respectively, shares issued
           and outstanding                           148,702        121,399
            Preferred Stock, $.01 par value
              20,000,000 and -0- shares
              authorized, respectively
              5,000,000 and -0- designated
              as Series M
              656,250 and -0- respectively,
              shares issued and outstanding              656             -
            Series M - PPM Cost                     (112,471)            -
         Paid in capital in excess of par         12,076,448      9,492,845
         Accumulated deficit                     ( 8,091,547)    (6,002,755)
                                                 ------------    -----------
                                                   4,021,788      3,611,489
                                                 ------------    -----------
                                                 $ 5,008,359    $ 5,447,494
                                                 ============   ============


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


                                       2
<PAGE>
                                       
               Interactive Technologies Corporation, Incorporated
                              Statements of Operations
               For the Three Months Ended February 28, 1998 and 1997
                                  (unaudited)


                                                    1998             1997
                                               -------------     -----------

Revenue                                         $         -      $    7,233

Other Income                                            357               -
                                               -------------     -----------


Operating expenses:
     Depreciation                                     5,414           5,403
     Amortization                                   227,202         227,202
     Production costs                                 8,252               -
     General and administrative                      94,682         140,110
     Interest expense:
          Stockholder                                     -               -
          Other                                      12,264          10,408
                                               -------------    -----------
                                                    347,814         383,123

                                               -------------    -----------
Loss from operations                               (347,457)       (375,890)


Income/(loss) before income taxes                  (347,457)       (375,890)
                                               -------------    ------------

Net income/(loss)                              $   (347,457)    $  (375,890)
                                               =============    ============



Net income/(loss) per share

             Primary                           $    (0.02)      $  (0.03)
             Diluted                           $    (0.02)      $  (0.03)










       Accompanying notes are an integral part of the financial statements.

                                       3
<PAGE>


               Interactive Technologies Corporation, Incorporated
                              Statements of Operations
               For the Nine Months Ended February 28, 1998 and 1997
                                  (unaudited)


                                                    1998             1997
                                               -------------     -----------

Revenue                                         $    (1,055)      $ 197,675

Other Income                                          1,154             129
                                               -------------     -----------


Operating expenses:
     Depreciation                                    16,242          16,209
     Amortization                                   681,605         704,879
     Production costs                                18,629               -
     General and administrative                     321,547       1,311,354
     Interest expense:
          Stockholder                                     -               -
          Other                                      36,793          45,043
                                               -------------    -----------
                                                  1,074,816       2,077,485

                                               -------------    -----------
Loss from operations                             (1,074,717)     (1,879,681)

Gain on sale of 90% of
     Charleston license                                   -         311,500


Income/(loss) before income taxes                (1,074,717)     (1,568,181)
                                               -------------    ------------

Net income/(loss)                              $ (1,074,717)    $(1,568,181)
                                               =============    ============



Net income/(loss) per share

             Primary                           $    (0.07)      $  (0.13)
             Diluted                           $    (0.07)      $  (0.13)










       Accompanying notes are an integral part of the financial statements.



                                       4
<PAGE>
<TABLE>
                                        
                   INTERACTIVE TECHNOLOGIES CORPORATION, INC.
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                       NINE MONTHS ENDED FEBRUARY 28, 1998
<CAPTION>

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

<S>               <C>         <C>      <C>     <C>    <C>         <C>           <C>
Bal at 5/31/97    13,479,613  $134,796                10,836,034  $(7,016,829)  3,954,001

Net Loss                                                           (  347,426)   (347,426)
                  ==========  ======== ======= ======= ==========  ===========  =========

Bal at 8/31/97    13,479,613  $134,796               $10,836,034  $(7,364,255) $3,606,575


Issuance of common
stock for cash       421,000     4,210                   206,290           -      210,500

Issuance of common
stock in exchange
for services         125,443     1,254                    75,621           -       76,875

Issuance of common
stock upon
conversion of debt   746,968     7,470                   273,632           -      281,102

Issuance of
Preferred Stock,
Series M                               350,000   350     349,650                  313,841
($36,159 PPM cost)

Net loss                                                           (  379,835)   (379,835)
                    ---------  ------- --------  ----  ----------   ---------- ---------
Bal at 11/30/97    14,773,024 $147,730 350,000   350  $11,741,227 $(7,744,090) $4,109,058

Issuance of common
stock upon
conversion of debt     97,147      971                     29,277                  30,249

Issuance of
Preferred Stock,
Series M                               306,250   306      305,944                 229,938
($76,312 PPM cost)

Net loss                                                           (  347,457)   (347,457)
                    ---------  ------- --------  ----  ----------   ----------  ----------
                   14,870,171 $148,701 656,250   656  $12,076,448 $(8,091,547) $4,021,788

















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


</TABLE>
                                       5
<PAGE>
                                     
               Interactive Technologies Corporation, Incorporated
                             Statement of Cash Flows
               For the Nine Months Ended February 28, 1998 and 1997


                                                       1998            1997
                                                  ------------     -----------

    Cash received from customers                                   $  102,446  
    Interest received                                                       -
    Cash paid to employees                                          ( 427,489)
    Cash paid to suppliers                                          ( 850,831)
    Interest paid:
      Stockholder                                           -               -
      Others                                                -       (  32,252)
                                                  ------------     -----------
 Net cash used in operating activities            $               $(1,208,126)
                                                  ------------     -----------
 
Cash flows from investing activities:
    Purchase of property and equipment                               (  4,260)
    Capitalized software development reduction                         50,000
    Subsidiary investment - SNT                              -        147,690
    License rights payment                                   -       (232,000)
    Joint Interest Investment                                               -
                                                  ------------     -----------
 Net cash used in investing activities                             $  (38,570)
                                                  ------------     -----------

Cash flows from financing activities:
    Issuance of convertible debentures                      -         300,000
    Proceeds from note payable                                              -
    Common stock issued for cash                            -         576,862
    Promissory notes isssued for cash                                 221,200
    Contract of sale deposits received                                 98,099
                                                  ------------     -----------
 Net cash provided by financing activities                          1,196,161
                                                  ------------     -----------

Net change in cash                                                    (50,535)
Cash at beginning of period                                            63,114
                                                  ------------     -----------

Cash at end of period                                              $   12,579
                                                  ============     ===========








       Accompanying notes are an integral part of the financial statements.




                                       6
<PAGE>
                                     
                   Interactive Technologies Corporation, Inc.
                             Statement of Cash Flows
               For the Nine Months Ended February 28, 1998 and 1997

                    Reconciliation of Net Income to Net Cash
                          Used in Operating Activities
                                  (unaudited)



                                                        1998           1997
                                                  -------------   -----------
 
Net income/loss                                   $               $(1,568,181)

Adjustments to reconcile net
 income/loss to net cash used in
 operating activities:
    Amortization                                                      704,879
    Depreciation                                                       16,209
    Increase/Decrease in accounts receivable                           19,917
    Increase in notes receivable                             -       (150,000)
    Decrease in accounts payable                                     (225,178)
    Increase in prepaid expenses                                     ( 21,918)
    Increase/Decrease in accrued expenses                            ( 39,288)
    Stock issued for supplies and services                            366,934
    Gain on sale of Charleston license                               (311,500)
                                                   ------------    ----------
   Total adjustments                               $               $  360,055
                                                   ------------    ----------

    Net cash used in operating activities          $              $(1,208,126)
                                                   ============    ===========




















       Accompanying 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.



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


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.

Earnings per share
------------------

     Primary  and fully  diluted  earnings  per  share  amounts  are based  upon
14,870,171 and 12,159,863, 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.

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

                          Year Ending
                            May 31,                           Amount

                              1998                          $   4,820
                                                            =========


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 license were formally issued.

     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


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


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 result of this lawsuit
the outcome of it is uncertain.  The  accompanying  financial  statements do not
contain any reserve for this contingency.

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 March 1998 and are unsecured.

5.  INCOME TAXES

     The Company used the accrual  method of  accounting  for tax and  financial
reporting  purposes.  At February 28, 1998,  the Company had net operating  loss
carryforwards  for  financial  and  tax  reporting   purposes  of  approximately
$8,100.00.  This  carryforwards  expire  through the year 2011, and are further
subject to the provisions of Internal Revenue Code Section 382.

6.       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-1.  

     On  August  1,  1997,  ITC  entered  into a  Manufacture  and  Distribution
Agreement with Airtech.  This  agreement  relating to the Medicare madel 950 air
filtration  unit,  has been used by ITC for the Private  Placement of additional
Securities.  This agreement and the working  arrangements are being treated as a
Joint  Venture  between ITC and Airtech until such time as the merger of the two
companies is complete. Accordingly all receipts from the sales of securities and
disbursement of funds are accounted for as a Joint Venture. At February 28, 1998
656,250 shares of the PPM Series M Perferred stock had been completed.








                                       10
<PAGE>
                      MANAGEMENT'S DISCUSSION AND ANALYSIS

INTERIM PERIOD FROM JUNE 1, 1997 THROUGH FEBRUARY 28, 1998.

     ITC's operations for the nine months year ended February 28, 1998 consisted
of primarily of 1)completion  of the development and preparation  phases of it's
"Liberty"  project;  2)  completion  of Rebate TV program which is airing in the
central Florida market;  3) the move of its facilities to new offices in Dallas,
Texas;  and 4)  completion  of  merger  activities  with  Airtech  International
Corporation.  Net revenues for this period were $(1,055) down from $197,781 from
the previous fiscal year due to the extended period which Rebate TV had been off
the air. ITC has  developed  and operates a computer  system and  communications
system to support its Rebate TV program on a national  basis even though  Rebate
TV was showing in one market. The operation of these systems and the development
of a national  marketing  program  during  this  period  resulted in General and
Administrative Expenses of $321,547 and a net loss from operations of $1,074,717
down from $1,879,681 for the previous fiscal year. Development of ITC's computer
system and communications link are substantially  complete and now available for
access on a national basis.

     During the nine months ended February 28, 1998 gross revenues were $933,311
down from $1,451,074 for the previous year. Gross profit  percentages  decreased
to 32.02% for 1998 compared to 33.65% in 1997.  This decrease is attributable to
the sale of the Turkey  Honeywell full service  distributorship  in January 1997
for $350,000  and the  reduction in price of some of the older models of Airtech
air  filtration  units.  The  decrease in gross profit  percentages  during this
period  after  adjusting  for the sale of the  Turkey  contract  in 1997 and the
recognization of $200,000 of deferred income was negligable.  Once all lines are
in  production  anticipates  average  gross profit  percentage in the 50% range.
During this quarter general and administrative expenses increased by $174,715 to
$367,495 for the quarter ended  February 28, 1998 compared to $201,780 for 1997.
This increase resulted from the re-assignment of individuals from product design
to operations.

Material Changes in Operations and Financial Condition

     ITC's  Rebate  TV was off the air for  most of the  nine  months  reported.
Operation of Rebate TV although  currently  distributable  and  supportable on a
national basis,  requires that it be rolled out on a market by market basis. ITC
faces a number of decisions as to whether to concentrate  its resources on local
markets  supported  by  smaller  vendors  (such as  Bedroom  Land and Kobe Steak
Houses) or to  concentrate  on multiple  markets driven by regional and national
advertisers  (such as Airtran  Airways and Cakes Across  America).  Rebate TV is
currently  airing in a limited Florida market until operations are completely up
and running in Dallas, Texas.

Liquidity and Capital Resources

     During the nine months  period ended  February 28, 1998,  ITC  continued to
fund  operations  and expansions  through  revenues and private sales of equity,
securities and debt. ITC received $1,487,740 from financing  activities in 1997,
up from $1,172,150 for fiscal year 1996. ITC expects to raise  additional  funds
through such sales, however has no commitment to do so and has no assurance that
such funds can be raised.

     In addition, ITC has agreed to issue $5,000,000 in Series M Preferred Stock
(the Series M Stock) on a private basis to  accredited  investors in the form of
200 units consisting of 25,000 shares of convertible preferred stock convertible
into  common  at the rate of one share for one  share of  preferred  and  25,000
warrants  convertible  into  common  stock at a price of $2.00  per  share.  The
preference  for this series is to a pro rata portion of 20% of the Gross Profits
from the sales of the AIRTECH Model 950 Air Purification  and Filtration  System
being  developed  as a Class II Medical  Device  for  Medicare  Recipients  with
Respiratory Conditions.  This preference is for a period of three years from the
date  production  begins.  AIRTECH  has agreed to assign a 25%  interest in this
revenue  stream  to ITC out of  which  this  20%  will  be set  aside  for  this
preference.  The  Series  M  Stock  will be  offered  pursuant  to  Rule  506 of
Regulation D of the Securities Act of 1933. Twenty-five percent (25%) of the net
proceeds of the sale of the Series M Stock will be used for market expansion and
distribution of the Rebate TV programming,  and  seventy-five  percent (75%) of
such net proceeds will be allocated for the development and  distribution of the
AIRTECH  Model  950.  ITC  does  not have an  underwriter  for  this  placement.
Management  expects  that the  sales of the  Series M Stock  will be  completed,
although  there is no  assurance  that either it will be  completed  or that the
funds will  otherwise be available to fund the  operations  and expansion of the
combined companies. PART II Other Information.

                                       11
<PAGE>

     The net operating  losses  suffered by Airtech during the first nine months
of this  fiscal  year  have  reduced  the  working  capital  of the  Company  by
approximately  $500,000. The success of the franchise program has been less that
anticipated. While there has been great interest in the franchises being offered
few sales have been  consummated  during the first  nine  months of this  fiscal
year. As the franchise sales are closed the market for the Airtech products will
increase and the Company anticipates  realizing increased franchise sales during
the next six months.  During March 1998,  the Company  close eight new franchise
sales, ending the trend of the first three quarters, with an additional 15 to 20
franchise's anticipated by May 31, 1998. Also during February and March of 1998,
the Company  entered into final  negiotions for two major contracts for its auto
filtration unit that will provide in excess of $6 million in revenues during the
next several  months and will receive in May 1998, a purchase order for the unit
developed  for the hotel  industry for 100,000  units that after  shipping  will
provide approximately $40 million in revenues.  The shipping should start before
the end of this fiscal year and be completed by the end of calander 1998.  While
additional working capital will be required for this large increase in revenues,
the Company is  confident  that it has sources  avaliable to supple this capital
requirement.  The Company anticipates gross profits from these sale in the range
of $15 to $18 million.

     On August 1, 1997 Airtech and Interactive  entered into a joint venture and
manufacturing  agreement for the Airtech Model 950 portable air filtration unit.
This joint venture allowed  Interactive to offer a private placement of Series M
Preferred Stock totaling  $5,000,000.  The proceeds from this private  placement
will be shared 25% for Interactive and 75% for Airtech.  These net proceeds will
be used to complete  development  of the Airtech Model 950 as a Class II medical
device and for working  capital for each Company.  The Companies  anticipate the
completion of this private  placement during the fiscal year ending May 31, 1998
and  believes  these  additional  funds will offset  future  deficits in working
capital.

     For the quarter  ended  February 28, 1998,  306,250  shares of the Series M
Preferred  Stock  were  sold with 75% of the net  proceeds  being  available  to
Airtech for working  capital and  completion of the Airtech Model 950 unit.  The
sales of additional shares of the Series M Preferred Stock,  sales of franchises
and  increased  sales of  commercial  air  filtration  units should  provide the
liquidity required.

Item l.  Legal Proceedings

     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

















                                       12
<PAGE>
<TABLE>


                    INTERACTIVE TECHNOLOGIES CORPORATION INC.

                        PROFORMA COMBINED BALANCE SHEETS
                           February 28, 1998 and 1997
                                   (Unaudited)

<CAPTION>

                                     
                                         Historical
                                --------------------------------
                                                     Acquired
                                  Interactive
                                  Technologies        Airtech       Adjustments
                                   Corporation     International        For
                                      Inc.          Corporation     Acquisition     Combined
                                --------------     -------------    ------------   -----------
                                            ASSETS

<S>                             <C>                <C>              <C>            <C>
Current Assets                    $250,940          $1,258,450                      $1,509,390
                                        

Property and equipment net
    of depreciation                 68,042             240,676                         308,718
Notes receivable                                       899,833                         899,833
Intellectual properties net of
    Amortization                 4,230,763(2)       1,205,737(3)    12,250,000(4)   17,686,500
Investment in Joint Venture        456,278           (472,687)                         (16,409)
Goodwill                                              605,313          848,307(4)    1,453,620
Other assets                         2,336            524,918                          527,254
                                -------------      ------------    -------------- ------------

Total Assets                    $5,008,359         $4,262,240      $13,098,307     $22,368,906
                                =============      ============    ============== ============
</TABLE>
<TABLE>


                      LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
<S>                             <C>               <C>             <C>            <C>      
Current Liabilities               $656,648           $936,601                       $1,593,249
Deferred Revenue                                      200,000                          200,000
Long-term liabilities              329,923             39,381                          369,304
Debentures                                                           9,000,000(4)    9,000,000
                                 -------------     ------------    --------------  -----------
Total Liabilities                  986,571          1,175,982                       11,162,553

Commitments and contingencies                                                 (5)

Stockholders' Equity
     Paid in Capital            12,113,335          4,236,590        4,098,307(4)   20,448,232
Retained Earning (Deficit)                                                                          
                                (8,091,547)        (1,150,332)                      (9,241,879)
                                ---------------    -------------   --------------  ------------
                                 4,021,788          3,086,258        4,098,307      11,206,353
                                ---------------    -------------   --------------  ------------
Total Liabilities and
   Stockholders' Equity         $5,008,359         $4,262,240      $13,098,307     $22,368,906
                                ===============    =============   ============== =============


</TABLE>



              See notes to Pro-Forma Combined Financial Statements

                                       13
<PAGE>
<TABLE>

                   INTERACTIVE TECHNOLOGIES CORPORATION, INC.
                     PROFORMA COMBINED STATEMENTS OF INCOME
                   For the Six Months Ended November 30, 1997
                                   (Unaudited)
<CAPTION>

                                        Historical               Adjustments
                             -------------------------------    -------------
                                                Acquired
                                                --------
                              Interactive
                              Technologies       Airtech         Adjustments
                              Corporation     International          For
                                  Inc.         Corporation       Acquisition     Combined
                             -------------    --------------    -------------   ----------
<S>                         <C>              <C>               <C>             <C>
Net revenues                  $  (3,325)       $   242,768                      $  239,443

Cost of Sales                                                                                     
                                      -            158,142                         158,142
                             -------------    --------------                    ------------

Gross income                                                                                      
                                 (3,325)            84,626                          81,301

General and Administrative                                                                        
                                143,893            310,841                         454,734
                              ------------    ---------------                   ------------

Net income from operations
 Before depreciation,
 Amortization and  taxes                                                                          
                               (147,218)          (226,215)                       (373,433)

Depreciation and amortization   232,616              8,250                         240,866
                              -----------     ---------------                   ------------

Net income (loss)
     From operations                                                                              
                               (379,834)          (234,465)                       (614,299)

Income taxes                                                                                      
                                      -                  -                               -
                              -----------     ---------------                   -------------

Net Income (Loss)             $(379,834)      $   (234,465)                     $ (614,299)
                              ===========     ===============                   =============


Primary  (loss)  per share    $   (0.02)(1)   $      (0.01)(1)                  $    (0.03)

Diluted (loss) per share      $   (0.02)(1)   $      (0.01)(1)                  $    (0.03)



</TABLE>




              See notes to Pro-Forma Combined Financial Statements

                                       14
<PAGE>
                   INTERACTIVE TECHNOLOGIES CORPORATION, INC.
                NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
                                February 28, 1998
                                   (Unaudited)

1.       Basis of Presentation

     The  accompanying  Pro-Forma  Combined balance sheet at August 31, 1997 and
related  combined  statement of  operations  for the nine months then ended have
been  prepared as if the business  combination  had occurred on June 1, 1997 the
start of the current fiscal year of Interactive.

     The purchase of the  outstanding  stock of Airtech by  Interactive is being
reflected in these Pro-Forma  Combined  Financial  Statements using the purchase
method for  recording  the  transaction.  The excess of cost over book value has
been reclassified to other assets of Airtech based on managements  estimates and
outside  valuation  based on projected cash flows and revenues from the revalued
assets.  No provision for  amortization of these revalued assets or goodwill are
reflected in these combined financial statements.

     There have been no changes in generally accepted  accounting  principals in
the  presentation  of the  combined  financial  statements  from the  historical
audited financial statements included herein by reference as previously filed or
in the audited financial statements of Airtech for its fiscal year ended May 31,
1997.

     Earnings  per Share  (EPS) is  reflected  as primary  earning per share and
fully dilluted  earnings per share set forth in the following table used for EPS
computation:

                                                         Historical         
                                              ------------------------------
                                                 ITC                Airtech

Weighted average number of shares             12,139,865          17,485,000
Less shares cancelled                        ( 3,400,000)
Add shares issued for debentures               1,144,444
Adjustment for combined presentation                             (17,485,000)
Common shares issued for acquired              8,000,000
                                             -----------
Primary shares outstanding                    17,884,309
Assuming conversion of convertable
   preferred issued for acquired               8,850,000
Assuming conversion of convertable
   Debentures issued for acquired             12,857,143
                                             -----------
Fully diluted shares outstanding              39,591,452

 
Notes to Historical Financial Statements

     1.  Intellectual  properties  reflected on the balance sheet of Interactive
consist of the following:

         License rights net of accumulated amortization
         of $405,000                                               $    270,000
         Proprietary software and trademark, net of accumulated
         amortization of $1,450,279                                   3,960,763
                                                                    -----------
                                                                     $4,230,763

     License   rights  consist  of  ITC's  Federal   Communications   Commission
Interactive  Video  and  Data  Services  (IVDS)  radio  station  license  in the
Melbourne-Titusville-Palm  Bay,  Florida and the  retained  10% interest in IVDS
license  in  the  Charleston-North  Charleston,  South  Carolina  service  areas
representing an additional enhancement to ITC'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  viewer 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

                                       15
<PAGE>
                   INTERACTIVE TECHNOLOGIES CORPORATION, INC.
                NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
                               February 28, 1998
                                   (Unaudited)

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.

     Proprietary  software  and  trademarks  consist of software  developed  for
integration into the rebate television market and a trademark known as Rebate TV
(TM) purchased in October 1995.  This  proprietary  software  allows ITC to be a
developer and producer of television,  interactive  television  and  interactive
digital  media   programming.   These  programs  can  be  developed  in  various
interactive  formats  for  cable,   broadcast  and  direct  broadcast  satellite
television  as well as for  Internet  distribution.  Rebate  TV is a  television
program  which  incorporates  interactive  media and  computer  data  management
allowing retail vendors to communicate their message to consumers, the allow the
consumer  to verify his or her  purchase,  with the  consumer  receiving  a cash
rebate from ITC for their purchases. Retailers represent a broad spectrum of the
business  community  including  grocer chains,  furniture  stores,  tire service
stores,  banks,  restaurants,  car  dealers  and a  variety  of other  specialty
businesses.

     2. Intellectual  properties  reflected on the balance of Airtech consist of
the cost incurred to date for the development of a full line of air purification
products for commercial,  consumer,  automobile and medical use.  Several of the
products will be eligible for a US and foreign patents with patent  applications
currently in process or planned .

Adjustments for Acquisition

     3. Per the stock  purchase  agreement  entered  into on May 8, 1997 between
Interactive Technologies Corporation, Inc. and Airtech International Corporation
the following  presents the securities and the related valuation of the purchase
of 100% of the issued and outstanding common stock of Airtech:


                                                        Value
         Description of Securities                    Per Share         Total
         -------------------------                   ----------        -------
         8,000,000 shares of Interactive
         Common Stock, registered                    $0.32(a)         $2,560,000

         8,850,000 shares of Interactive
         Preferred Stock, registered and
         convertible into Common Stock               $0.32(b)          3,982,500

         $9,000,000 in Convertible
         Debentures                                  At  Face          9,000,000

         Additional shres due Airtech
          Stockholders because if increase
          in Interactive common stock
          from May 31, 1997                          $0.032(a)         1,762,565
                                                                      ----------
         Total value of purchase of 100% of 
         Airtech Common Stock                                       $ 16,154,565


                                       16
<PAGE>
                   INTERACTIVE TECHNOLOGIES CORPORATION, INC.
                NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
                                November 30, 1997
                                   (Unaudited)
                                        
     (a) The closing of bid price of  Interactive  common  stock on February 28,
1998 was $0.32 per share. This price per share will be adjusted to the price per
share on the closing date.

The following represents the allocation of the purchase price:

         Book value of Airtech common stock            $   3,086,258
         Intellectual properties                          12,250,000
         Excess of purchase price over cost                  818,307
                                                       -------------
         Total Purchase Price                            $16,154,565

 
4.  Interactive Technologies has the following litigation pending:

     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 asserted 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 not unfavorable to the Company. .

     The Company is not a party to any other  pending legal  proceedings  except
for claims and lawsuits  arising in the normal  course of business.  The Company
does not believe  that these claims or lawsuits  will have a material  effect on
ITC=s financial condition or results of operations.  Accordingly no provision or
accrual for potential losses are reflected in the Pro-Forma  Combined  Financial
Statements.

     Airtech International Corporation has the following litigation pending:

     Airtech International Corporation,  McCleskey Sales and Service, Inc., C.J.
Comu and John Potter, plaintiffs vs Honeywell, Inc., Honeywell Environmental Air
Control, Inc. And Suzanne Haas,  defendants;  No.  3:96CV-1855-D,  United States
District Court for the Northern District of Texas, Dallas Division.

     In this case,  Airtech,  a subsidiary  and two of its  officers  filed suit
against  Honeywell,  Inc. And a Honeywell  subsidiary and an employee  asserting
several  causes of action.  These  causes of action  include  breach of contract
relating  to  termination   of  the  Company=s   Full  Service   Distributorship
agreements, for defamation and tortious interference with contract relating to a
merger  agreement  between  the Company and DCX,  Inc.,  for unfair  competition
regarding  claims made by  Honeywell  about it air  purification  products,  for
negligent  misrepresentation  regarding  representations made to the Company and
its  subsidiary  regarding  the  exclusivity  of certain  arrangements  with the
defendants,  and for declaratory  relief and attorney=s fees.  Honeywell filed a
counterclaim against the Company,  McCleskey, Comu and Potter. Honeywell alleges
that the Company and McCleskey owe Honeywell money for past purchases,  and that
Comu  and  Potter  interfered  with  the  relationship   between  McCleskey  and
Honeywell.  Honeywell seeks $71,000 in actual damages and  unspecified  punitive
damages  and  attorney's  fees.  The  Company  has  denied  all of the  material
allegations of Honeywell=s counterclaim.  The Company plans to vigorously defend
the counterclaim  and believes the counterclaim to be without merit.  

     Honeywell,Inc., plaintiff, vs Airtech International Corporation, AirSoPure,
Inc. And Richard  Allegrati,  defendants:  No. WMN 97-238 United States District
Court for the District of Maryland, Baltimore Division.

                                       17
<PAGE>

                   INTERACTIVE TECHNOLOGIES CORPORATION, INC.
                NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
                               February 28, 1998
                                   (Unaudited)

     Honeywell  filed suit  against the Company,  a subsidiary  and an employee,
alleging violations of the Lanham Act and the Maryland Uniform Trade Secrets Act
and the common law. The suit alleges that certain Airtech and AirSoPure products
were sold in violation of the Honeywell=s trademarks,  and that the cover design
of certain products of Airtech/AirSoPure was wrongfully obtained. The suit seeks
an injunction and unspecified damages.  Rather than incur substantial additional
attorney=s  fees,  the Company  agreed to the entry of a preliminary  injunction
regarding  the sale of a very  small  number  of  modified  Honeywell  products,
immaterial to the  Company's  business.  The Company  denies all of the material
allegations  of  Honeywell's  claims,  is vigorously  defending  this case.  The
Company believes Honeywell's claims to be without merit.

     Accordingly  no reserve or accrual  has been  reflected  in these  Combined
Pro-Forma Financial Statements for this pending litigation.

     A motion for  dismissal  was entered into as  settlement  of the  Honeywell
litigation in March 1998. 








                                       18


<PAGE>
Item 6. Exhibits


                        AIRTECH INTERNATIONAL CORPORATION
                           CONSOLIDATED BALANCE SHEET
                           February 28, 1998 and 1997
                                   (Unaudited)


                                                   1998                 1997
                                                -------------      -------------
Assets
Current Assets:
          Cash and cash equivalents          $       39,094        $      34,946
          Accounts Receivable                       285,288              789,621
          Inventories                               297,620              274,361
          Other Currents Assets                     636,448              252,329
                                                -------------      -------------
                Total Current Assets              1,258,450            1,351,257
Property, Plant and Equipment Net of
          Accumulated Depreciation                  240,676              214,485
Property held for Resale                                                 150,000
Intellectual Properties                           1,205,737              336,977
Notes Receivable-Long Term                          899,833              350,000
Investment in Subsidiaries                          605,313              621,567
Other Assets                                        524,918              519,050
                                                 -------------     -------------

                 Total Assets                 $   4,734,927        $   3,543,336
                                              ================     =============

Liabilities and Stockholders' Equity
Current Liabilities:
     Current maturities of long-term debt     $      24,560       $       10,391
     Accounts Payable-trade                         113,006              202,123
     Accrued Payroll and employee benefits          196,113               46,082
     Joint Venture Advances                         472,687
     Notes Payable-Other                            126,922
     Notes Payable-Officers                         476,000                    -
                                              ----------------     -------------
               Total Current Liabilities          1,409,288              258,596
Long-Term Debt                                       39,381               15,725
Deferred Revenue                                    200,000                    -
Commitments and Contingent Liabilities

Stockholders' Equity
       Common Stock, issued 16,223,642 shares
       in 1997 and 14,917,342 shares in 1996            165                  163
       Series C Preferred Stock, issued 1,000
       shares in 1997 and 1,000 shares in 1996        1,000                1,000
       Paid-in Capital                            4,235,425            3,945,062
       Retained Earnings (Deficit)               (1,150,332)           (677,210)
                                              ----------------     -------------
               Total Stockholders' Equity         3,086,258            3,269,015
                                              ----------------     -------------

 Total Liabilities and Stockholders' Equity   $   4,734,927        $   3,543,336
                                              ================     =============




                 See Notes to Consolidated Financial Statements



                                       19
<PAGE>

               AIRTECH INTERNATIONAL CORPORATION AND SUBSIDIARIES
                        CONSOLIDATED STATEMENT OF INCOME
              For the Three Months Ended February 29, 1998 and 1997
                                   (Unaudited)


                                            1998                        1997
                                        --------------            --------------


Sales                                   $     422,619             $     910,943

Cost of Sales                                  86,524                   372,191
                                        ---------------            -------------

Gross Income                                  336,095                   538,752

General and Administrative expenses           367,495                   201,780
                                         ---------------           -------------


Net  Income  ( Loss)                    $    ( 31,400)            $     336,972
                                        ================           =============





Primary Income ( Loss) per share        $         -               $     0.02
Dulited  Income ( Loss) per share       $         -               $     0.02
                                                         







                 See Notes to Consolidated Financial Statements











                                       20
<PAGE>


               AIRTECH INTERNATIONAL CORPORATION AND SUBSIDIARIES
                        CONSOLIDATED STATEMENT OF INCOME
               For the Nine Months Ended February 28, 1998 and 1997
                                   (Unaudited)




                                          1998                        1997
                                      ---------------            ---------------


Sales                                   $   933,311                 $ 1,451,074

Cost of Sales                               428,873                     600,487
                                       ---------------           ---------------

Gross Income                                504,438                     850,587


General and Administrative expenses
                                            995,027                     777,497
                                        ---------------          ---------------



                                               
Net  Income  ( Loss)                     $ (490,589)                 $    73,090
                                        ===============          ===============

Primary Income ( Loss) per share        $   (    0.02)           $           -
Dulited  Income ( Loss) per share       $   (    0.02)           $           -








                 See Notes to Consolidated Financial Statements







                                       21
<PAGE>



               AIRTECH INTERNATIONAL CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements
                           February 28, 1998 and 1997
                                   (Unaudited)
 
Note 1:  Summary of Significant Accounting Policies

     Organization.   Airtech   International   Corporation   (the  Company)  was
incorporated  in the state of Texas in March of 1995.  In  August  of 1995,  the
Company  became  a  Full  Service  Distributor  for  Honeywell  Enviracaire,   a
manufacturer of commercial air filtration systems, and began marketing and sales
of  these  products.  In  August  of  1995,  the  Company  determined  that  the
Enviracaire model 13000 could be eligible for Medicare Part B Code and began the
pursuit of an application  for such code,  receiving  notification  of a pending
issuance of a Medicare Part B Code in April of 1996.  In May of 1996,  Honeywell
Enviracaire cancelled the Company's Full Service Distributorship and the Company
withdrew its Medicare application.

     In December 1995, the Company acquired 100% of McCleskey Sales and Service,
Inc., (MSS) a Texas corporation, in exchange for 165,000 shares of common stock.
MSS is  engaged  in the  sales  and  service  of  heating  and air  conditioning
equipment.  MSS was also a Honeywell  Enviracaire Full Service  Distributor with
prior  knowledge  of  the  installation  and  service  of  this  air  filtration
equipment.

     In  September  1996,  the Company  initiated  a design  program to create a
complete line of air filtration and purification products. This line of products
includes  commercial  ceiling mounted units, wall mounted units,  ductable units
and a down  draft  salon  table  for the  nail  industry  as well as a  portable
automobile unit and a portable unit for Medicare. The technology being developed
by the Company will combine ozone generation with air filtration, a new concept.

     In March 1996, the Company  incorporated  AirSoPure,  Incorporated (ASP) in
the state of Texas as a wholly-owned  subsidiary.  ASP was formed to establish a
franchise program for the Airtech products.  The franchisees will be the primary
source for the marketing,  sales and  distribution  of the Company's  commercial
technology.

     Basis of  Financial  Statement  Presentation.  The  consolidated  financial
statements   include  the   accounts  of  the  Company  and  its   subsidiaries.
Intercompany  transactions  and  accounts  have  been  eliminated.  Subsidiaries
purchased  are  recorded  at cost  using the  equity  method of  accounting  for
acquisitions.

     Cash Equivalents.  Holdings of highly liquid investments with maturities of
three months or less when purchased are considered to be cash equivalents.

     Inventories. Inventories are valued at the lower of the first-in, first-out
(FIFO) cost or market. Assembled units are valued at the cost of components plus
allocated labor.

     Property, Plant, and Equipment. Property, plant, and equipment are recorded
at cost less  depreciation and  amortization.  Depreciation and amortization are
primarily  accounted for on the straight  line method based on estimated  useful
lives. The amortization of leasehold improvements is based on the shorter of the
lease term or the life of the improvement.  Betterments and large renewals which
extend the life of the asset are capitalized whereas maintenance and repairs and
small renewals are expended as incurred.

     Amortization.  Goodwill  and other  intangable  assets are  amortized  over
useful lives ranging from 5 years to 20 years, using the straight line method of
computing amortization.

     Sales.  Income is recognized in the financial  statements (and the customer
billed)  either when  materials  are shipped from stock or when the vendor bills
the Company  for the order.  Net sales are  arrived at by  deducting  discounts,
freight, and sales tax from gross sales.

                                       22
<PAGE>

               AIRTECH INTERNATIONAL CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements
                           February 28, 1998 and 1997
                                   (Unaudited)

     Franchise Fees.  Franchise fees are recognized in the financial  statements
when all  material  services  relating  to the  sale of a  franchise  have  been
performed by the Company and there is no  obligation to refund any cash received
or forgive any unpaid notes or receivables.

     Intellectual  Properties.  Cost incurred by the Company in  developing  its
products which are considered  patentable are  capitalized and will be amortized
over  the  estimated  useful  life  of  the  related   patents.   The  technical
requirements for the design,  testing and completion of working  proto-types are
the primary cost  capitalized.  Amortization  will be recorded  after a unit has
been placed in production.

     Income Taxes. The Company uses the asset and liability method as identified
in SFAS 109, Accounting for Income Taxes.

     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.

     Stock-Based  Compensation.  The Company  follows the intrinsic  value based
method of accounting as  prescribed  by APB 25,  Accounting  for Stock Issued to
Employees, for its stock-base compensation.

     Principals  of  Consolidation.  The Company  acquired  McCleskey  Sales and
Service,  Inc.  in  November  1995  electing  the  equity  purchase  method  for
accounting for this purchase. The Company incorporated AirSoPure Incorporated in
March 1997.  The  accompanying  consolidated  financial  statements  include the
general  accounts  of the  Company  and these  wholly  owned  subsidiaries.  All
material  intercompany  accounts  and  balances  have  been  eliminated  in  the
consolidation except for cash advances to a subsidiary.

     Nature of Operations.  The Company's  primary  business is the manufacture,
sales and distribution of air filtration  equipment.  The technology utilized in
the Company's  air  filtration  equipment  will remove  odors,  gases,  viruses,
pollen,  mold spores and other airborne  particulates.  Users of this technology
include, restaurants,  medical facilities, public buildings, schools, gaming and
bingo facilities.

Note 2: Other Current Assets

    At February 28, 1998 and 1997 other assets are comprised of the following:

                                                 1998             1997    
         Prepaid expenses                      $   54,015       $
         Prepaid legal                            163,212          11,651
         Prepaid merger cost                      412,500         228,438
         Other                                      6,721          12,240
         Total                                  $ 636,448        $ 252,329

     The Company has entered into a contingent  fee agreement  with the law firm
representing  its interest in the  Honeywell  law suit.  Under the terms of this
agreement the Company will pay certain  out-of-pocket  expenses  incurred during
the litigation, to date these expenses have totaled $118,841.


                                       23
<PAGE>

               AIRTECH INTERNATIONAL CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements
                           February 28, 1998 and 1997
                                   (Unaudited)

Note 3: Property, Plant and Equipment

     At February 28, 1998 and 1997,  property  plant and equipment  comprised of
the following:

                                                      1998             1997    
         Furniture and fixtures                   $    18,168      $   17,750
         Computers and equipment                      152,430         124,184
         Vehicles                                     127,783          77,686
         Leasehold improvements                         9,388           9,388
         Assembly equipment                            65,266          56,150  
         Total                                        373,035         285,158
         Less: Accumulated depreciation               132,359          77,686
         Net                                       $  240,676       $ 214,485


Note 4: Property Held for Resale

     In 1995 the Company purchased the exclusive rights to Honeywell Enviracaire
products for the county of Turkey for $250,000 and for the country of Taiwan for
$150,000. In January 1997 the Company sold the rights to Turkey for $350,000.

Note 5: Intellectual Properties

     Prior to the cancellation of the Company's Full Service  Distributorship in
the U.S. by Honeywell in May of 1996 the Company had  received  notification  of
approval  within 90 days of its Medicare Part B  application  for a portable air
filtration system manufactured by Honeywell. Subsequent to this cancellation the
Company  withdrew it Medicare Part B application.  While the Company is pursuing
the development of a full line of commercial air filtration systems, its primary
focus has been on the development of a portable air filtration  system that will
qualify for Medicare Part B and a portable air filtration unit for vehicles.

     The Company has incurred costs totaling $1,205,737 at February 28, 1998 and
$336,977 at February 28, 1997 in its design and testing of these  products.  The
Company  currently has in production one commercial  model and  anticipates  its
complete line of commercial air filtration  products to be in production  during
the 1998  fiscal  year.  The  portable  air  filtration  unit for vehicle use is
scheduled for  production by the end of 1998.  The air  filtration  system being
designed for Medicare Part B applications  should be in a working  proto-type by
the end of 1997 and the application  submitted during the first quarter of 1998.
The Company  forecast  additional cost of  approximately  $1 million dollars for
completion  of the vehicle and Medicare  Part B units.  The Company has and will
continue to apply for patents on its products.

Note 6: Notes Receivable

     At  February  28,  1998 and 1997,  notes  receivable  is  comprised  of the
following:

                                                   1997             1996    
         Domestic notes receivable              $ 300,000        $        0
         Foreign notes receivable                 666,500           350,000
         Total                                    966,500           350,000
         Less: Current Maturities                  66,667
                                               ----------       -----------   
         Long Term Notes Receivable            $  899,833       $   350,000




                                       24
<PAGE>

               AIRTECH INTERNATIONAL CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements
                           February 28, 1998 and 1997
                                   (Unaudited)


     These notes receivable bear interest at 8% and are payable in terms ranging
from 12 months to 36 months.  Credit is extended on a evaluation  of the payee's
financial  condition  and  general  credit  information.  If the  note  is for a
franchise fee or for equipment, these will serve as collateral.

Note 7:  Goodwill

     The Auditor's for the Company made a change in accounting principles in the
audited  financial  statements  for the Fiscal Years Ended May 31,1997 and 1996.
This  accounting  change recorded the full purchase price of McCleskey Sales and
Service, Inc., purchase by Airtech on November 30, 1995, as goodwill rather than
investment in subsidiary as carried on the audited financial  statements for the
Fiscal Year Ended  February 29, 1996.  While  management  does not  necessarialy
disagree with this  accounting  change,  management does feel that the Auditor's
should have  recorded as goodwill  the  difference  between cost and fair market
value of the assets  acquired.  The Auditor's in their adjustment did not record
the fair  market  values of cash,  accounts  receivable,  inventories,  accounts
payable,  notes payable or the retained earnings of McCleskey Sales and Service,
Inc.,  after  adjusting the accounting  method of this acquired  subsidiary from
cash method to accrual method. The adjustments required to the books and records
of Airtech to effect this  accounting  change  were not  provided to the Company
until  April of 1998 nor were  restated  audited  financial  statements  for the
Fiscal Years Ended May 31, 1997 and May 31, 1996  provided to the Company  until
April of 1998.  Management  anticipates reviewing this accounting change and the
valuations used during the audit of its financial statements for the Fiscal Year
Ending May 31, 1998.

Note 8: Other Assets

  At February 28, 1998 and 1997, other assets is comprised of the following:

                                                   1998               1997    
         Deposits                              $     16,739      $     16,279
         Prepaid royalties                          500,000           500,000
         Other                                        8,179             2,771
         Total                                   $  524,918        $  519,050





                                       25

<PAGE>

               AIRTECH INTERNATIONAL CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements
                           February 28, 1998 and 1997
                                   (Unaudited)

Note 9: Notes Payable

  At February 28, 1998 and 1997, notes payable is comprised of the following:

                                                   1998             1997    
         Nations Bank                            $   18,980       $   26,116
         Compass Bank                                10,479
         Resource One                                34,482
                                               ------------     ------------
         Total                                       63,941           26,116
         Less: Current maturities                    24,560           10,391
         Long-Term Debt                          $   39,381       $   15,735


     These  installment  notes  payable  are  secured by  vehicles  purchase  by
McCleskey Sales and Service, Inc., and have interest rates ranging from 7% to 9%
payable over terms of 36 months to 60 months.

Note 10: Notes Payable-Other

     On  January 7, 1998  Airtech  into a  Promissory  Note with the law firm of
Friedman & Associates,  P.C. and Friedman, Driegert & Hsueh, L.L.C. collectively
as settlement of outstanding  legal fees for the ligitation  pending between the
Company and Honeywell and the Company and Compton etal in the principal amout of
$102,921.74  with interest at eight  percent (8%) per annum.  Under the terms of
this note, the note shall become payable only from the proceeds upon  conclusion
of either or both cases referenced above (See Subsequant Events Note).

     On December  31, 1997 the Company  entered  into a  promissory  note with a
former  employee  as payment in full of accrued but unpaid  salaries.  Under the
terms of this  agreement the Company  agreed to a cash payment of $6,400.  and a
promissory note for 24,000.  payable in monthly installments of $2000. per month
with  interest  at eight (8%) per annum.  The cash  payment is  scheduled  on or
before April 15, 1998 with interest accrueing from May1, 1998.

Note 11:  Related Party Transactions

     From June 1, 1997 thru  February  28, 1998 John  Potter,  President  of the
Company and C. J. Comu, C.E.O. of the Company have made cash advances to provide
liquidity  for the Company  totalling $ 216,000.  The Company has entered into a
promissory  note for $108,000 each to Mr. Potter and Comu subject to shareholder
ratification at the next scheduled  shareholders  meeting on April 20, 1998. The
interest  rate will be in  accordance  with the  ratification  of the notes.  In
addition to these cash  advances no salaries  were paid to either John Potter or
C. J. Comu during the  calander  year 1997  because of the lack of  liquidity of
Airtech  during this  period.  On December  31, 1997 the Company  entered into a
promissory  note with Mr.  Potter and Comu in the  principal  amount of $130,000
each with interest at eight percent (8%) per annum.  The interest on these notes
will begin accrueing on May 1, 1998.

                                       26
<PAGE>

               AIRTECH INTERNATIONAL CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements
                           February 28, 1998 and 1997
                                   (Unaudited)

Note 12: Earnings Per Common Share

     Earnings  per  common  share are  computed  by  dividing  net income by the
average  number of Common  shares  outstanding  during the period.  The weighted
average  number  of  Common  shares   outstanding  at  February  28,  1998  were
approximately 16,100,000 and approximately 12,200,000 at February 28, 1997.

Note 13: Income Taxes

     The Company uses the accrual  method of  accounting  for tax and  financial
reporting purposes. At February 28, 1998 and 1997, the Company had net operating
loss carryforwards for financial and tax reporting purposes. These carryforwards
expire through the year 2011,  and are further  subject to the provisions of the
Internal Revenue Code Section 382.

Note 14: Operating Leases

     The Company  presently leases its facilities in Texas under  non-cancelable
operating  lease  agreements  expiring  through  September  1999.  These  leased
facilities total approximately 13,000 square feet of office and warehouse space.

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

                                                  Amount 
                  1998                          $  78,000
                  1999                             37,680
                  Total                          $ 15,680

Note 15: Commitments and Contingencies

     An original  petition was filed in State District Court,  Dallas,  Texas in
August 1995 by Kristen S. Venable naming McCleskey Sales and Service,  Inc., and
Trane,  Inc.,  Defendants,  alleging breach of contract,  breach of warranty and
negligence relating to the installation of Trane air conditioning equipment. The
complaint seeks damages in excess of the minimum,  jurisdictional  limits of the
Court,  plus  punitive and  exemplary  damages.  McCleskey  and Trane have filed
answers denying all claims.  The matter is currently  awaiting a trial date. The
claims  against  McCleskey  are covered by insurance  which  coverage  amount is
believed by  management  to be sufficient to cover the claims in the event of an
adverse judgement.

     Airtech International Corporation,  McCleskey Sales and Service, Inc., C.J.
Comu and John Potter,  plaintiffs, vs Honeywell Environmental Air Control, Inc.,
and Suzanne Haas,  defendants;  No. 3:96CV-1855-D,  United States District Court
for the Northern District of Texas, Dallas Division.

     In this case,  Airtech,  a subsidiary  and two of its  officers  filed suit
against  Honeywell,  Inc. and a Honeywell  subsidiary and an employee  asserting
several  causes of action.  These  causes of action  include  breach of Contract
relating  to the  termination  of the  Company's  Full  Service  Distributorship
agreements, for defamation and tortious interference with a contract relating to
a merger agreement,  for unfair  competition  regarding claims made by Honeywell
about its air purification products, for negligent  misrepresentation  regarding
representations made to the Company and its subsidiary regarding the exclusivity
of certain  arrangements  with the defendants,  and for  declaratory  relief and
attorney's fees. Honeywell filed a counter claim against the Company, McCleskey,
Comu and Potter.  Honeywell alleges that the Company and McCleskey owe Honeywell
money  for  past  purchases,  and  that  Comu  and  Potter  interfered  with the
relationship between McCleskey and Honeywell.  Honeywell seeks $71,000 in actual
damages and unspecified  punitive  damages and attorney's  fees. The Company has
denied all of the material allegations of Honeywell's counterclaim.  The Company
plans to vigorously  defend the counterclaim and believes the counterclaim to be
without merit.

                                       27
<PAGE>
               AIRTECH INTERNATIONAL CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements
                           February 28, 1998 and 1997
                                   (Unaudited)


     Honeywell,   Inc.,  plaintiff,   vs  Airtech   International   Corporation,
AirSoPure, Inc. and Richard Allegrati,  defendants: No. WMN 97-238 United States
District Court for the District of Maryland, Baltimore Division.

     Honeywell  filed suit  against the Company,  a subsidiary  and an employee,
alleging violations of the Lanham Act and the Maryland Uniform Trade Secrets Act
and the common law. The suit alleges that certain Airtech and AirSoPure products
were sold in violation of the Honeywell trademarks, and that the cover design of
certain products of Airtech/AirSoPure was wrongfully obtained. The suit seeks an
injunction and unspecified  damages.  The venue of this suit has been changed to
United  States  District  Court  for the  Northern  District  of  Texas,  Dallas
Division,  without  injunctive  relief and will be included in the other  action
pending before this court. The Company denies all of the material allegations of
Honeywell's claims, and is vigorously defending this case.

Note 16: Subsequent Events

     On May 8, 1997 the Company  entered into a Stock  Purchase  Agreement  with
Interactive  Technologies  Corporation,  Inc  (ITC).  Under  the  terms  of this
agreement ITC will purchase a minimum of 81% of the outstanding  common stock of
the Company in exchange  for  8,000,000  shares of ITC Common  stock,  8,850,000
shares of ITC  convertible  Preferred Stock and $9,000,000 in ITC 8% convertible
Debentures.

     This  transaction  will be closed at such time as a registration  statement
filed with the  Securities  and  Exchange.  At February 28, 1998 a  registration
statement had been filed and was pending  action by the  Securities and Exchange
Commission.  This transaction will be closed when a minimum of 81% of the shares
tendered have been offered for exchange.

     On August 1, 1997,  Airtech  entered into a  Manufacture  and  Distribution
Agreement with  Interactive.  This agreement  relating to the Medicare Model 950
air filtration  unit, has been used by Interactive for the Private  Placement of
additional  securities.  This agreement and the working  arrangements  are being
treated as a Joint Venture between  Airtech and  Interactive  until such time as
the merger of the two companies is complete.  Accordingly  all receipts from the
sales of  securities  and  disbursement  of funds are  accounted  for as a Joint
Venture.  At February  28,  1998,  656,250  shares of the PPM Series M Preferred
Stock  had been  completed.  The  Joint  Venture  is not  consolidated  in these
Financial Statements only, the transactions directly effecting Airtech have been
reflected.  Under the terms of this Agreement,  Airtech would be advanced 75% of
the net  proceeds  from  the  sale of these  securities.  AIRTECH  INTERNATIONAL
CORPORATION AND SUBSIDIARIES

     On March 27, 1998  Airtech  International  Corporation,  McCleskey  Sales &
Service,  Inc. and AirSoPure,  Inc. agreed to a Motion to Dismiss with Prejudice
all  ligitation  with  Honeywell,  Inc., et al and the Compton Group et al. As a
result of this Motion to Dismiss the note  payable to for legal  service in Note
10 above is paid in full.  The  Company  received no monies as a result of these
actions  and  therefore  has no  further  obligation  under  the  terms  of this
promissory note date January 7, 1998.

                                       28
<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
















                                       29
<PAGE>