FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

(Mark One)

[X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

For the quarterly period ended    June 30, 1997

                                       OR

[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

For the transition period from __________________ to __________________ 

Commission file number                0-24900

                             ITI Technologies, Inc.
             (Exact name of registrant as specified in its charter)

           Delaware                                     06-1340453
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)

2266 North Second Street, North St. Paul, MN               55109
(Address of principal executive offices)                 (Zip Code)

                                 (612) 777-2690
              (Registrant's telephone number, including area code)

                                 Not applicable
              (Former name, former address and former fiscal year,
                         if changed since last report)

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 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 _____

                      APPLICABLE ONLY TO CORPORATE ISSUERS

         Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.

         As of July 31, 1997, there were 8,382,762 shares of common stock
outstanding.


<PAGE>



                             ITI TECHNOLOGIES, INC.

                                    FORM 10-Q

                           QUARTER ENDED JUNE 30, 1997

<TABLE>
<CAPTION>
                                INDEX                                               PAGE

PART I --         FINANCIAL INFORMATION

<S>                                 <C>                                              <C>
                  Item 1 --         Financial Statements                              3

                  Item 2 --         Management's Discussion and Analysis             12
                                    of Financial Condition and Results
                                    of Operations

PART II           OTHER INFORMATION

                  Item 5 --         Other Information                                16

                  Item 6 --         Exhibits and Reports on Form 8-K                 16

                  Signatures                                                         18

</TABLE>


<PAGE>



                                     PART I
                              FINANCIAL INFORMATION

Item 1.       Financial Statements

                        REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of ITI Technologies, Inc.

We have reviewed the accompanying consolidated balance sheet of ITI
Technologies, Inc. and Subsidiaries as of June 30, 1997, and the related
consolidated statement of operations for the three month and six month periods
then ended and the consolidated statement of cash flows for the six-month period
then ended. These financial statements are the responsibility of the Company's
management.

We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should
be made to the accompanying 1997 financial statements for them to be in
conformity with generally accepted accounting principles.

We have audited, in accordance with generally accepted auditing standards, the
consolidated balance sheet of ITI Technologies, Inc. and Subsidiaries as of
December 31, 1996, and the related consolidated statements of operations, cash
flows and stockholders' equity for the year then ended (not presented herein);
and in our report dated February 18, 1997, we expressed an unqualified opinion
on those consolidated financial statements. In our opinion, the information set
forth in the accompanying consolidated financial statements is fairly stated, in
all material respects, in relation to the consolidated financial statements from
which it has been derived.

/s/ Coopers & Lybrand L.L.P.

COOPERS & LYBRAND L.L.P.
Minneapolis, Minnesota
July 28, 1997


<PAGE>



                             ITI TECHNOLOGIES, INC.
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                              FOR THE THREE            FOR THE SIX
                                                MONTHS ENDED           MONTHS ENDED
                                                  JUNE 30,               JUNE 30,
                                           --------------------    --------------------
                                             1996        1997        1996        1997
                                           --------    --------    --------    --------
                                                            (UNAUDITED)
<S>                                        <C>         <C>         <C>         <C>     
Net sales                                  $ 23,319    $ 25,403    $ 45,428    $ 49,143
Cost of goods sold                           12,316      13,511      23,757      25,727
Inventory purchase accounting adjustment                    725                     725
                                           --------    --------    --------    --------
Gross profit                                 11,003      11,167      21,671      22,691
Operating expenses:
  Marketing, general end administrative       3,549       4,764       6,955       8,706
  Research and development                    1,515       1,834       3,075       3,482
  Purchased in-process research
       and development costs                              5,200                   5,200
  Amortization of intangible assets             228         296         456         524
                                           --------    --------    --------    --------
Operating income (loss)                       5,711        (927)     11,185       4,779
Other income (expense):
  Interest, net                                 190         127         320         391
  Other, net                                    (17)         (5)         (4)        (24)
                                           --------    --------    --------    --------
Income (loss) before income tax expense       5,884        (805)     11,501       5,146
Income tax expense                            2,215       1,616       4,293       3,823
                                           --------    --------    --------    --------
Net income (loss)                          $  3,669    $ (2,421)   $  7,208    $  1,323
                                           ========    ========    ========    ========
Primary earnings (loss) per share          $   0.39    $  (0.29)   $   0.76    $   0.15
                                           ========    ========    ========    ========
Weighted average shares outstanding           9,498       8,334       9,463       8,665
                                           ========    ========    ========    ========
</TABLE>


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


<PAGE>





                             ITI TECHNOLOGIES, INC.
                          CONSOLIDATED BALANCE SHEETS
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                              DECEMBER 31,   JUNE 30,
                                                                  1996        1997
                                                                --------    --------
                                                                          (UNAUDITED)
<S>                                                             <C>         <C>     
ASSETS
   Current assets:
     Cash and cash equivalents                                  $ 13,352    $    212
     Accounts receivable                                          14,593      15,019
     Inventories                                                  16,627      19,355
     Deferred income taxes                                         1,384       1,362
     Other current assets                                          2,147       2,386
                                                                --------    --------
          Total current assets                                    48,103      38,334
   Property and equipment                                          7,647       9,508
   Excess of cost over net assets acquired                        23,398      28,736
   Other intangible assets                                        10,646      18,135
   Notes receivable, net of current portion                                    1,275
                                                                --------    --------
          Total assets                                          $ 89,794    $ 95,988
                                                                ========    ========

   LIABILITIES AND STOCKHOLDERS' EQUITY

   Current liabilities:
     Accounts payable                                           $  2,981    $  3,715
     Accrued wages                                                 1,586       2,088
     Other accrued expenses                                        1,489       2,352
                                                                --------    --------
          Total current liabilities                                6,056       8,155
   Borrowings under revolving credit agreement                                 1,875
   Income taxes                                                    4,412       6,524
                                                                --------    --------
          Total liabilities                                       10,468      16,554
                                                                --------    --------

   Commitments

   Stockholders' equity:
     Common stock ($0.01 par value; authorized 30,000
          shares; issued 9,036, outstanding 8,414 shares at
          December 31, 1996 and issued 9,067, outstanding
          8,355 shares at June 30, 1997)                              90          91
     Additional paid-in capital                                   72,411      72,590
     Retained earnings                                            14,491      15,814
     Treasury stock, at cost (622 shares at December 31, 1996
          and 712 shares at June 3O, 1997)                        (7,666)     (9,061)
                                                                --------    --------
          Total stockholders' equity                              79,326      79,434
                                                                --------    --------
          Total liabilities and stockholders' equity            $ 89,794    $ 95,988
                                                                ========    ========
</TABLE>

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


<PAGE>




                             ITI TECHNOLOGIES, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

                                                            FOR THE SIX
                                                            MONTHS ENDED
                                                              JUNE 30,
                                                          1996        1997
                                                        --------    --------
                                                            (UNAUDITED)
OPERATING ACTIVITIES:
Net income                                              $  7,208    $  1,323
Adjustments to reconcile net income to cash
provided from operating activities:
  Amortization of intangible assets                          608         569
  Depreciation and amortization                              523         792
  Provision for bad debt expense                             100
  Inventory purchase accounting adjustment                               725
  Purchased in-process research and development costs                  5,200
  Changes in operating assets and liabilities:
     Accounts receivable                                  (1,308)      1,751
     Inventories                                          (2,989)       (122)
     Other current assets                                    131        (971)
     Accounts payable                                       (705)        (23)
     Income taxes payable                                  1,560
     Accrued expenses                                        678         788
                                                        --------    --------
Net cash provided by operating activities                  5,806      10,032
                                                        --------    --------
INVESTING ACTIVITIES:
Additions to property and equipment                       (2,319)     (1,463)
Additions to other intangible assets                        (673)       (947)
Issuance of notes receivable                                            (946)
Acquisitions of businesses, net of cash acquired                     (20,476)
                                                        --------    --------
Net cash used in investing activities                     (2,992)    (23,832)
                                                        --------    --------
FINANCING ACTIVITIES:
Proceeds from revolving credit agreement                               5,375
Payment of revolving credit agreement                                 (3,500)
Proceeds from exercise of common stock options               179         180
Payments for treasury stock                                           (1,395)
                                                        --------    --------
Net cash provided by financing activities                    179         660
                                                        --------    --------
NET INCREASE (DECREASE) IN CASH
  AND CASH EQUIVALENTS                                     2,993     (13,140)
CASH AND CASH EQUIVALENTS
  AT BEGINNING OF PERIOD                                   9,937      13,352
                                                        --------    --------
CASH AND CASH EQUIVALENTS
  AT END OF PERIOD                                      $ 12,930    $    212
                                                        ========    ========

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



<PAGE>



NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1.       BASIS OF PRESENTATION

         The unaudited consolidated statements of operations for the three month
         and six month periods ended June 30, 1997 and 1996, reflect, in the
         opinion of management of ITI Technologies, Inc. (the "Company"), all
         adjustments necessary for a fair statement of the results of operations
         for the interim periods. The results of operations for any interim
         period are not necessarily indicative of results for the full year. The
         consolidated balance sheet data as of December 31, 1996, were derived
         from audited consolidated financial statements but do not include all
         disclosures required by generally accepted accounting principles. The
         unaudited consolidated financial statements should be read in
         conjunction with the consolidated financial statements and notes
         thereto incorporated in the Company's Annual Report on Form 10-K for
         the year ended December 31, 1996. Coopers & Lybrand L.L.P., the
         Company's independent accountants, have performed a limited review of
         the interim financial information included herein. Their report on such
         review accompanies this filing.

         The unaudited consolidated financial statements include the accounts of
         the Company and its wholly-owned subsidiaries. All significant
         intercompany accounts and transactions have been eliminated.

         In February 1997, the Financial Accounting Standards Board issued
         Statement No. 128, a new standard for earnings per share (EPS)
         calculations. Statement No. 128 requires presentation of "basic"
         instead of "primary" and "diluted" instead of "fully diluted" EPS.
         Basic EPS includes only actual weighted average common shares
         outstanding during the period. Basic EPS would have been $0.41 or $0.02
         higher, and would have remained unchanged at $(0.29) in the second
         quarter of 1996 and 1997, respectively. Basic EPS would have been
         $0.81, or $0.05 higher, and $0.16, or $0.01 higher, for the six months
         ended June 30, 1996 and 1997, respectively. There is no significant
         difference between the Company's diluted and fully diluted EPS. The new
         standard must be adopted in the fourth quarter of 1997.

2.       ACQUISITIONS

         On April 30, 1997, the Company purchased all of the outstanding stock
         of CADDX-CADDI Controls, Inc. ("CADDX") for $19.0 million in cash (the
         "Acquisition"). In conjunction with the Acquisition, the Company also
         purchased from the majority shareholder of CADDX the manufacturing
         facility leased by CADDX for $530,000. Immediately following the
         Acquisition, the corporate name was changed to CADDX Controls, Inc.
         CADDX, located in Gladewater, Texas, designs, manufactures and markets
         hardwire electronic security systems in the United States and certain
         international locations.



<PAGE>


2.       ACQUISITIONS (CONTINUED)

         The Acquisition was accounted for using the purchase method of
         accounting and, accordingly, the results of operations of CADDX have
         been included in these financial statements from the effective date,
         April 30, 1997. The Acquisition cost has been allocated to the assets
         acquired and liabilities assumed based on their estimated fair values
         at the Acquisition date, including $4.0 million to net current assets,
         $1.2 million to property and equipment, $1.25 million to customer
         lists, principally related to CADDX customers outside the United
         States, $2.1 million to net long-term deferred tax liabilities, $3.75
         million to trade names, and $5.2 million to technology under
         development, leaving a $5.7 million excess of cash paid over net assets
         acquired. The values assigned to the various identifiable intangible
         assets were determined based on anticipated discounted after-tax cash
         flows for the period estimated to encompass the remaining life of the
         technology existing at the Acquisition date and the expected life cycle
         of the next generation of technology under development at the
         Acquisition date. Depreciation periods for property and equipment and
         amortization periods for trade names and the excess of cash paid over
         net assets acquired are consistent with ITI's existing policies. The
         customer list will be amortized over 15 years.

         At the time of the Acquisition, CADDX had under development technology
         related to the NX-8 security system. It is not currently clear whether
         any of this technology will be commercially acceptable or whether it
         will function correctly. The development of the NX-8 requires several
         design and engineering innovations, including the creation of special
         telecom and power interfaces that would be acceptable under any
         country's regulations anywhere in the world, the development of
         software to drive these interfaces and a buss structure to allow high
         speed transmissions over long lines without loss of signal, all within
         the specified physical space and cost structure contemplated. It is not
         certain that these design innovations can be accomplished, and failure
         to achieve any one of these innovations will cause the NX-8 project to
         fail. As a result, in May 1997, the Company made a $5.2 million
         non-recurring charge to operations for the value assigned to NX-8
         technology in process at the time of the Acquisition. Also, subsequent
         to the Acquisition, the Company included in cost of goods sold in the
         quarter ended June 30, 1997, a $725,000 non-recurring purchase
         accounting adjustment which resulted from the sale of inventory which
         had been written up to reflect estimated selling price less the sum of
         estimated costs of completion and sale at the time of the Acquisition.



<PAGE>



2.       ACQUISITIONS (CONTINUED)

         The following are unaudited pro forma consolidated results of
         operations for the six month periods ended June 30, 1996 and 1997, as
         if the Acquisition had occurred as of the beginning of each period. The
         unaudited pro forma consolidated results of operations have been
         adjusted to eliminate the effect of the $5.2 million non-recurring
         charge to operations for the value assigned to the in-process NX-8
         technology and the $725,000 non-recurring purchase accounting
         adjustment which resulted from the sale of the purchased inventory. The
         pro forma information also includes adjustments for additional
         depreciation and amortization, the reduction of compensation expense
         for a non-active majority shareholder, the reduction of interest
         income, additional interest expense due to the reduction of cash used
         for the Acquisition and the impact on the tax provision due to these
         adjustments. The unaudited pro forma consolidated results of operations
         do not purport to represent what the Company's results of operations
         could actually have been if the Acquisition had, in fact, occurred on
         that date.

                                                            Pro Forma
                                                        Six Months Ended
                                                             June 30,
                                                             --------
                                                          1996      1997
                                                          ----      ----
                                                           (Unaudited)
  
                  Net sales, in thousands               $54,536   $55,083
                  Net income, in thousands                7,880     7,436
                  Primary earnings per share              $0.83     $0.86

         On May 22, 1997, the Company also completed the cash purchase of the
         Regency product line and dealer program from the Silent Knight Division
         of Willknight, Inc., located in Minneapolis, Minnesota, for $1.8
         million. In the event sales of Regency products over the 36 month
         period ending May 2000 exceed certain levels, then a contingent payment
         of up to $800,000 will be made. This product line allows the Company to
         offer an established product that integrates intrusion protection, fire
         protection and access control. The Regency dealer program consists of
         over 100 Regency dealers throughout North America. The purchase price
         was allocated to the estimated fair value of the assets acquired,
         primarily to customer lists, which is being amortized over its expected
         useful life of 10 years.



<PAGE>



3.       LITIGATION

         On August 17, 1995, the Company commenced an action for patent
         infringement against Pittway Corporation and its subsidiary, Ademco
         Distributions, Inc., in the United States District Court for the
         District of Minnesota. The Company intends to vigorously protect its
         patented technology from infringement. Costs associated with this
         action are being capitalized as a patent asset associated with the
         related technology. As of June 30, 1997, the Company has capitalized
         $2.1 million of costs related to this lawsuit.

4.       CREDIT FACILITY

         Also on April 30, 1997, the Company entered into an unsecured $15.0
         million bank revolving credit facility. The facility provides for
         interest calculated, at the Company's option, at LIBOR plus 1.0% or a
         commercial bank's base rate less 1.25%. In addition, the facility
         requires a commitment fee of 0.1% per annum on the unused portion of
         the facility. The agreement allows for payment of annual dividends
         equal to 25% of the Company's net income for the immediately preceding
         fiscal year and requires the maintenance of specified ratios and
         minimum net worth.



<PAGE>



5.       OTHER FINANCIAL STATEMENT DATA (IN THOUSANDS):

                                                  December 31,  June 30,
                                                      1996        1997
                                                    --------    --------
                                                               (UNAUDITED)
Accounts receivable:
   Accounts receivable                              $ 15,493    $ 16,054
   Allowance for doubtful accounts                      (900)     (1,035)
                                                    --------    --------
        Total                                       $ 14,593    $ 15,019
                                                    ========    ========

   Inventories:
        Raw materials                               $  7,358    $  8,667
        Allowance for obsolescence                    (1,400)     (1,545)
                                                    --------    --------
                                                       5,958       7,122
        Work-in-process                                3,519       5,271
        Finished goods                                 7,150       6,962
                                                    --------    --------
            Total                                   $ 16,627    $ 19,355
                                                    ========    ========
   Property and equipment, net:
        Machinery and equipment                     $  8,178    $  9,288
        Furniture and fixtures                         2,949       3,410
        Building and improvements                        668       1,688
                                                    --------    --------
                                                      11,795      14,386
        Accumulated depreciation and amortization     (4,148)     (4,878)
                                                    --------    --------
            Total                                   $  7,647    $  9,508
                                                    ========    ========
   Other intangible assets:
        Trademarks and trade names                  $ 10,079    $ 13,829
        Technology and patents                         1,591       2,514
        Customer list                                              3,007
        Other                                            590         614
                                                    --------    --------
                                                      12,260      19,964
        Accumulated amortization                      (1,614)     (1,829)
                                                    --------    --------
            Total                                   $ 10,646    $ 18,135
                                                    ========    ========
   Other accrued expenses:
        Warranty                                    $    400    $    550
        Professional fees                                416         437
        Other                                            673       1,365
                                                    --------    --------
            Total                                   $  1,489    $  2,352
                                                    ========    ========


<PAGE>






Item     2. Management's Discussion and Analysis of Financial Condition and
         Results of Operations.

GENERAL:

          On April 30, 1997, the Company purchased all of the outstanding stock
     of CADDX-CADDI Controls, Inc. ("CADDX") for $19.0 million in cash (the
     "Acquisition"). In conjunction with the Acquisition, the Company also
     purchased from the majority shareholder of CADDX the manufacturing facility
     leased by CADDX for $530,000. Immediately following the Acquisition , the
     corporate name was changed to CADDX Controls, Inc. CADDX, located in
     Gladewater, Texas, designs, manufactures and markets hardwire electronic
     security systems.

          The Acquisition was accounted for using the purchase method of
     accounting and, accordingly, the results of operations of CADDX have been
     included in the financial statements from the effective date, April 30,
     1997. The Acquisition cost has been allocated to the assets acquired and
     liabilities assumed based on their estimated fair values at the Acquisition
     date, including $4.0 million to net current assets, $1.2 million to
     property and equipment, $1.25 million to customer lists, principally
     related to CADDX customers outside the United States, $2.1 million to net
     long-term deferred tax liabilities, $3.75 million to trade names, and $5.2
     million to technology under development, leaving a $5.7 million excess of
     cash paid over net assets acquired. The values assigned to the various
     identifiable intangible assets were determined based on anticipated
     discounted after-tax cash flows for the period estimated to encompass the
     remaining life of the technology existing at the Acquisition date and the
     expected life cycle of the next generation of technology under development
     at the Acquisition date.

          At the time of the Acquisition, CADDX had under development technology
     related to the NX-8 security system. It is not currently clear whether any
     of this technology will be commercially acceptable or whether it will
     function correctly. The development of the NX-8 requires several design and
     engineering innovations, including the creation of special telecom and
     power interfaces that would be acceptable under any country's regulations
     anywhere in the world, the development of software to drive these
     interfaces and a buss structure to allow high speed transmissions over long
     lines without loss of signal, all within the specified physical space and
     cost structure contemplated. It is not certain that these design
     innovations can be accomplished, and failure to achieve any one of these
     innovations will cause the NX-8 project to fail. As a result, in May 1997,
     the Company made a $5.2 million non-recurring charge to operations for the
     value assigned to NX-8 technology in process at the time of the
     Acquisition. Also, subsequent to the Acquisition, the Company included in
     cost of goods sold in the quarter ended June 30, 1997, a $725,000
     non-recurring purchase accounting adjustment which resulted from the sale
     of inventory which had been written up to reflect estimated selling price
     less the sum of estimated costs of completion and sale at the time of the
     Acquisition.


<PAGE>


          On May 22, 1997, the Company also completed the cash purchase of the
     Regency product line and dealer program from the Silent Knight Division of
     Willknight, Inc., located in Minneapolis, Minnesota, for $1.8 million. In
     the event sales of Regency products over the 36 month period ending May
     2000 exceed certain levels, then a contingent payment of up to $800,000
     will be made. This product line allows the Company to offer an established
     product that integrates intrusion protection, fire protection and access
     control. The Regency dealer program consists of over 100 Regency dealers
     throughout North America. The purchase price was allocated to the estimated
     fair value of the assets acquired, primarily to customer lists.

RESULTS OF OPERATIONS:

          NET SALES.  Net sales increased by $2.1 million, or 8.9%, from $23.3 
     million for the three months ended June 30, 1996, to $25.4 million for the 
     three months ended June 30, 1997. Net sales increased by $3.7 million, or 
     8.2%, from $45.4 million for the six months ended June 30, 1996, to $49.1 
     million for the six months ended June 30, 1997. The increase in sales is 
     primarily attributable to volume increases, as prices remained relatively 
     stable over these periods.

          Second quarter 1997 net sales include the results of the CADDX
     acquisition for May and June and the Regency product line for June.
     Excluding the effect of the acquisitions and sales to the Company's largest
     customer's branch operations, sales to all other customers increased 13.1%
     from the second quarter of 1996. Sales to the Company's largest customer's
     branch operations declined from 40.7% of total sales in the second quarter
     of 1996 to 26.7% of total sales in the second quarter of 1997 and are
     expected to continue to decline in both dollar and percentage terms through
     the remainder of 1997.

          GROSS PROFIT. Gross profit increased from $11.0 million for the second
     quarter of 1996 to $11.2 million for the second quarter of 1997, but
     decreased as a percentage of net sales from 47.2% to 44.0%. A substantial
     portion of the decrease is the result of a $725,000 non-recurring purchase
     accounting adjustment which resulted from the write-up of CADDX inventory
     at the acquisition date to reflect estimated selling price less the sum of
     estimated costs of completing and sale. Gross profits for the second
     quarter of 1997, excluding the $725,000 non-recurring purchase accounting
     charge, were 46.8% compared to 47.2% in the second quarter in 1996. The
     decrease in gross profit percentage is due to lower gross margins for CADDX
     sales that are going through distributors rather than directly to dealers.
     Gross profit increased from $21.7 million for the first six months of 1996
     to $22.7 million for the first six months of 1997. These increases were
     primarily due to increased sales volume.

          MARKETING, GENERAL AND ADMINISTRATIVE EXPENSES. Marketing, general and
     administrative expenses increased from $3.5 million for the second quarter
     of 1996 to $4.8 million for the second quarter of 1997, and increased from
     $7.0 million for the first six months of 1996 to $8.7 million for the first
     six months of 1997. The dollar increase in expenses is primarily due to the
     addition of the CADDX subsidiary. As a percentage of net sales, marketing,
     general and administrative expenses for the second quarter increased from
     15.2% in 1996 to 18.8% in 


<PAGE>


     1997, and for the first six months of the year from 15.3% in 1996 to 17.7%
     in 1997, due to increased employment costs in the sales and marketing
     areas, costs associated with new product introductions and a $300,000
     charge for anticipated costs associated with a change in our distribution
     arrangements in Australia.

          RESEARCH AND DEVELOPMENT EXPENSE. Research and development expenses
     increased $319,000 to $1.8 million for the second quarter of 1997, and
     increased $407,000 to $3.5 million for the first six months of 1997. The
     increase was primarily due to the Company's continued emphasis on research
     and new product development. New products introduced in 1997 include the
     Quick Bridge family, a group of wireless receivers equipped with interfaces
     that add on to other manufactures' hardwired panels, thus broadening the
     market opportunities for ITI Learn Mode sensors. Additionally, the Company
     has launched its Simon security system, an entry-level wireless system
     aimed at those in the industry looking for a low-cost wireless solution for
     mass marketing programs. The Company anticipates that it will continue this
     high level of development activity through the remainder of 1997.

          PURCHASED IN-PROCESS RESEARCH AND DEVELOPMENT COST. During the second
     quarter in conjunction with the Acquisition, the Company made a $5.2
     million non-recurring charge to operations for value assigned at the
     Acquisition date to purchased technology under development.

          AMORTIZATION OF INTANGIBLE ASSETS. Amortization of acquisition-related
     intangible assets increased from $228,000 for the second quarter of 1996 to
     $296,000 for the second quarter of 1997, and from $456,000 for the first
     six months of 1996 to $524,000 for the first six months of 1997. The
     increase is attributable to the Company's second quarter acquisitions.
     Amortization of these intangible assets is expected to increase to $352,000
     in the third and fourth quarters as a full quarter of the
     acquisition-related amortization is reflected.

          NET INTEREST INCOME. Net interest income decreased from $190,000 for
     the second quarter of 1996 to $127,000 for the second quarter of 1997 as a
     result of the acquisitions for the second quarter utilizing the Company's
     available cash. During the first six months of 1996, net interest income
     totaled $320,000 compared to $391,000 for the first six months of 1997,
     which was due primarily to an increase in cash available for placement in
     high quality, short-term investments prior to the acquisitions.

          INCOME TAX EXPENSE. Income tax expense decreased from $2.2 million for
     the second quarter of 1996 to $1.6 million for the second quarter of 1997,
     and from $4.3 million for the first six months of 1996 to $3.8 million for
     the first six months of 1997. The Company's effective tax rate for these
     periods varies from the federal statutory rate primarily due to state
     income taxes, net of federal benefit, and the non-deductibility for income
     tax purposes of the amortization of excess of cost over net assets
     acquired. Additionally, the 1997 effective tax rate was impacted by the
     non-deductibility for income tax purposes of the $5.2 million non-recurring
     charge for purchased technology under development.


<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

          The Company has funded its operations primarily with cash from
     operations. For the first six months of 1997, the Company generated net
     cash from operating activities of $10.0 million. Net cash provided by
     operating activities resulted primarily from $7.0 million in net income
     excluding non-cash acquisition-related adjustments, $1.4 million in
     depreciation and amortization charges, and $1.4 million from changes in
     operating assets and liabilities, principally accounts receivable and
     accrued expenses.

          During 1997, the Company invested $20.5 million in acquisitions of
     businesses, net of cash acquired. Additionally, the Company made purchases
     of property and equipment totaling $1.5 million. For the year ended
     December 31, 1997, the Company expects that purchases of property and
     equipment will be approximately $3.0 million.

          For the first six months of 1997, net cash provided by financing
     activities was $660,000. This was the result of credit agreement
     borrowings, net of payments, totaling $1,875,000 and proceeds from the
     exercising of stock options of $180,000, less the purchase of 90,000
     additional shares of the Company's common stock for $1,395,000.

          A substantial amount of the Company's working capital is invested in
     accounts receivable and inventories. The Company periodically reviews
     accounts receivable for noncollectibility and inventories for obsolescence
     and establishes allowances it believes are appropriate. In addition, the
     Company periodically assesses the recoverability of intangible assets based
     on undiscounted cash flows.

          On April 30, 1997, the Company entered into an unsecured $15.0 million
     bank revolving credit facility. The facility provides for interest
     calculated, at the Company's option, at LIBOR plus 1.0% or the commercial
     bank's base rate less 1.25%. In addition, the facility requires a
     commitment fee of 0.1% per annum on the unused portion of the facility. The
     agreement allows for payment of annual dividends equal to 25% of the
     Company's net income for the immediately preceding fiscal year and requires
     the maintenance of specified financial ratios and minimum net worth.

          The Company believes that cash flows from operations and funds
     available through the Company's credit facility will be adequate to fund
     its working capital and capital expenditure requirements at least through
     the end of 1997.

EFFECT OF INFLATION AND FOREIGN CURRENCY TRANSACTIONS

          The Company believes that inflation and foreign currency fluctuations
     have not had a significant effect on its operations.


<PAGE>

                           PART II - OTHER INFORMATION

Item 5.  Other Information.

         None.

Item 6. Exhibits and Reports on Form 8-K.

         (a)      The following exhibits are filed as part of this Quarterly
                  Report on Form 10-Q:

                  11.      Statement regarding computation of per share
                           earnings.

                  15.      Letter regarding unaudited interim financial
                           information.

                  27.      Financial data schedule.

         (b)      The following Current Reports on Form 8-K were filed by the
                  Company during the quarter ended June 30, 1997, or during the
                  period from June 30, 1997, to the date of this Quarterly
                  Report on Form 10-Q:

                  (i)      A Current Report on Form 8-K was filed by the Company
                           on April 17, 1997, to report the information
                           contained in the Company's press release dated April
                           7, 1997, regarding the agreement entered into by the
                           Company to acquire CADDX-CADDI Controls, Inc., a
                           Gladewater, Texas, based designer and manufacturer of
                           advanced hardwire electronic security systems.

                  (ii)     A Current Report on Form 8-K was filed by the Company
                           on May 15, 1997, to report that effective April 30,
                           1997, the Company acquired from four individual
                           shareholders all of the common stock of CADDX-CADDI
                           Controls, Inc., a Gladewater, Texas, based designer
                           and manufacturer of advanced hardwire electronic
                           security systems. The financial statements and pro
                           forma financial information required by Item 7 of the
                           Current Report on Form 8-K were not filed, however,
                           in accordance with Item 7(a)(4) and Item 7(b)(2) of
                           the Current Report on Form 8-K, it was reported that
                           such financial statements and pro forma financial
                           information would be filed on or before July 14,
                           1997.


<PAGE>


                  (iii)    A Current Report on Form 8-K was filed by the Company
                           on June 2, 1997, to report the acquisition of the
                           Regency Product Line and Dealer Program from the
                           Silent Knight Division of Willknight, Inc. of Maple
                           Grove, Minnesota.

                  (iv)     An Amendment No. 1 to Current Report was filed by the
                           Company on Form 8-K/A-1 on July 14, 1997, to amend
                           the Current Report on Form 8-K filed on May 15, 1997,
                           for the purpose of filing the financial statements
                           and pro forma financial information required by Item
                           7 of the Current Report on Form 8-K with respect to
                           the acquisition by the Company of CADDX-CADDI
                           Controls, Inc.


<PAGE>



                                   SIGNATURES

Pursuant to the Requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

Dated:  August 14, 1997                     ITI TECHNOLOGIES, INC.



                                            By  /s/ Jack A. Reichert
                                                Jack A. Reichert
                                                Vice President of Finance
                                                (Chief Accounting Officer)